YEREVAN (Stockopedia news)–Hong Kong based Fortune Oil has acquired a 35% stake in a company that owns three iron ore mines in Armenia.
Wednesday’s deal will see the London-listed group pay $24 million for a 35% equity interest in Bounty Resources Armenia Ltd, which owns mines with proven, probable and inferred reserves of 1,832 million tons.
Fortune has the option to increase this holding to 50% for an additional $16 million investment. Bounty’s first mine, Hrazdan, contains high quality iron ore at 40% iron concentration and is expected to be profitable in 2014.
The move follows a decision by Fortune last November to diversify its established gas production and oil processing operations. Under a new strategy it is planning to capitalize on the demand for energy and resources in China by investing in high growth commodities such as oil, gas, coal, iron ore, copper and other metals, in countries, which are close to China.
“We are extremely pleased to have begun implementing our new Resources Strategy with our investment in these three iron ore mines in Armenia,” said Fortune’s chief executive Tee Kiam Poon. “The ever growing demand for resources in China, in addition to these mines containing a significant amount of reserves, makes this a very exciting opportunity. This is truly a “step-change” for the company and its shareholders. We look forward to this acquisition making a positive contribution in years to come.”
Shares in Fortune rose by 9.5% to 11.5p Wednesday morning on news that it had acquired Bounty Resources. Fortune shares hovered between 6 points and 8 points for much of 2010 before jumping as high as 12.5 points in December. That was triggered by news of promising drilling results from its Liulin coalbed methane project in China and a restructuring of its natural gas business, which could free up funds for further investment totaling £24.2m.
China is the world’s largest importer of iron ore, with imports accounting for 60% of China’s total iron ore consumption in 2010. Between 2000-2010, China’s iron ore imports increased from 69 million tons to 619 million tons. It is expected that the country’s iron ore imports will increase to approximately 712 million tons in 2011.