BC Iron releases summary KPMG report

THE BOURSE WHISPERER: Perth-based iron ore producer BC Iron’s has released a summary by of the report by independent expert, KPMG Corporate Finance explaining why it was of the opinion the now terminated Scheme of Arrangement with Regent Pacific Group was not fair and not reasonable, and therefore not in the best interests of BC Iron’s shareholders.

KPMG’s assessed value range for BC Iron in its original report was $3.80 to $4.13 per share, as compared to Regent Pacific’s offer of $3.30.

KPMG retained the services of Golder Associates to assist it in the valuation of the Company’s mineral exploration, development and production assets, which made up the majority of this valuation.

The assumptions of KPMG are set out in the Summary Report which is now released.

In January 2011, BC Iron announced a Scheme with Regent Pacific offering to acquire all existing BC Iron shares not already owned by it for cash consideration of $3.30 per BC Iron share.

At that time, the BC Iron directors surprised a lot of market observers by quickly unanimously recommending the Scheme in the absence of a superior proposal and subject to the opinion of an Independent Expert, concluding that the Scheme was in the best interests of BC Iron shareholders.

However, it was noted that BC Iron shareholders should have the opportunity to assess the merits of the Scheme once all relevant information had been compiled.

BC Iron subsequently commissioned KPMG to prepare an Independent Expert report in relation to the Scheme. Unfortunately, intervening events resulted in the Independent Expert report being delayed until Regent Pacific reinstated its finance for the Scheme in late April 2011.

KPMG were then instructed to refresh and finalise the report which was completed last week.

KPMG formed the opinion that, after having regard to both valuation and other qualitative matters, the Scheme was neither fair nor reasonable and therefore not in the best interests of the Company’s shareholders.

The Independent Expert report was prepared specifically in relation to the Scheme for inclusion in a Scheme Booklet but as the Scheme was terminated, the report was not subject to normal regulatory review and the Scheme Booklet was no longer required to be sent to shareholders.

As a result the report was not published in a form suitable for market release.

However, BC Iron determined it appropriate, and KMPG consented, to release a Summary Report, which accompanied the company’s market release.

The Summary Report outlines KPMG’s reasoning and the basis on which it reached its assessed values and opinion.

KPMG notes that a number of considerations applicable to the Scheme no longer apply.

Given the specific purpose for which the Summary Report has been prepared and the fact the Scheme is no longer proceeding, BC Iron notes that the Summary Report is provided solely for general information purposes and that readers are not entitled to place reliance upon its contents, including for making investment decisions in relation to BC Iron.