The Fortescue Ltd (ASX: FMG) share price is in focus after announcing the acquisition of Red Hawk Mining Ltd (ASX: RHK).
Fortescue is one of Australia’s biggest iron ore miners, while Red Hawk Mining is a prospective iron ore business.
Fortescue to acquire Red Hawk Mining shares
It was announced to the ASX that Fortescue will buy all of the shares of Red Hawk Mining for a cash consideration of A$1.05 per share, rising to A$1.20 per share if Fortescue acquires at least 75% of Red Hawk within seven days.
The offer represents a premium of 29% to Red Hawk’s average share price of the last 30 days to 24 January 2025, while the increased offer is a 48% premium and values Red Hawk at A$254 million.
Red Hawk’s board of directors have obtained an independent expert report from BDO which concludes the offer is “fair and reasonable”. The Red Hawk board have unanimously recommended that shareholders accept the offer, assuming a better bid doesn’t come in the expert continues concluding the offer is fair and reasonable.
The offer can be accepted today and will be closed on 3 March 2025.
What’s the appeal of the miner?
Fortescue highlighted that Red Hawk is the owner of the Blacksmith iron ore project, which is an undeveloped iron ore project located 30km west of Fortescue’s Solomon operations in the Western Hub.
The total Blacksmith mineral resource estimate is 243 million tonnes (mt) at a 59.3% Fe grade, according to Red Hawk’s company disclosures.
Final thoughts on Fortescue shares
Considering how close the Blacksmith project is to existing infrastructure, Fortescue can unlock synergies and value that other miners wouldn’t be able to.
Fortescue clearly thinks it’s worth more than what Red Hawk shares were recently trading at.
How useful this acquisition is will depend on what happens with the iron ore price, which is dependent on China. I wouldn’t call Fortescue shares a great buy right now, it could be better to invest when the market is more pessimistic on the iron ore market.
For now, there are other ASX dividend shares I’d rather buy.
