A valuation study has placed the fair price of the
The valuation, done by investment firm CIBC World Markets, included discounted cash flow models of the company’s holdings. It found that the company’s 7% overriding royalty on gross revenues, and its 10-per-short-ton commission on all sales, made up about 75% of the Fund’s value.
The Fund also holds 18.9% of the shares of the private Iron Ore Company of Canada, in which Rio owns a 56.1% interest through its 2000 takeover of Australian mining house North Ltd. The remaining interest in IOC is held by Japanese industrial conglomerate Mitsubishi.
Rio Tinto announced in early March that it would be petitioning the Ontario Securities Commission to allow it to mail a formal offer to unit-holders because of the delay in getting a valuation from CIBC World Markets. Under Ontario securities regulations governing royalty trusts, the Labrador Fund had to engage an outside firm to provide a valuation opinion.
Rio is seeking to buy the fund to consolidate its ownership of Iron Ore Co. of Canada. Its $13.50 offer was a 17% premium over the fund’s traded price at the time. Since the bid was announced, the fund’s units have traded in the $14-to-$15 range.
Be the first to comment on "Rio offer too low, says Labrador Fund"