Why Aquila Resources Limited shares are falling today

Iron ore takeover target Aquila Resources Limited (ASX: AQA) has seen its shares fall nearly 2% to $3.54 in late trading today. And that’s despite news that Mineral Resources Limited (ASX: MIN) has taken a 12.78% stake in the company.

Aquila had previously received a takeover offer of $3.40 a share in early May from major shareholder, Chinese steel giant Baosteel, and rail group Aurizon Holdings Ltd (ASX: AZJ). Now with Mineral Resources taking what could be a blocking stake, Baosteel and Aurizon may take their offer off the table.

And that’s the most likely reason for today’s price fall. It seems investors aren’t confident that a bidding war will erupt, and that Baosteel and Aurizon will walk away, leaving Mineral Resources holding the keys to Aquila.

Mineral Resources combines mining services and mineral processing with iron ore production – it’s the fifth largest iron ore producer in Australia – as well as a controlling stake in managanese explorer Mesa Minerals Limited (ASX: MAS). Now the company says it has developed a total mine to port development plan for Aquila’s West Pilbara Iron Ore Project (WPIOP), and will work with stakeholders to deliver the project on attractive terms.

What is perhaps interesting is that Mineral Resources has identified stakeholders as Baosteel and Aquila – there’s no mention of Aurizon – suggesting the company wants to exclude Aurizon from any talks on the project.

The West Pilbara Iron Ore (WPIO) Project is forecast to produce at least 30 million tonnes of iron ore per year, but has had several funding issues in the past. No surprise when you consider that the cost was estimated at around $7.4 billion in early 2013.

Aquila’s shares might be falling, but there could finally be light at the end of the tunnel for shareholders, with Mineral Resources’ entry into the company. Now two significant shareholders should be able to finalise the development of the WPIO Project.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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