Much is being said about Cliffs taking over Freewest - this isn't how Cliffs operate. Cliffs have historically taken a minor position to ensure they are the operator for which they collect a management fee. This minor position has historically been at least 10% of the outstanding shares.
Cliffs have ~10% of FWR and with Noront's latest offer will end up with ~2.5% of NOT. Cliffs will want to retain a 10% ownership of the larger company. This means they must accumulate 7.5% of the 230.5 million fully diluted total shares. It's anyone's guess how many shares of NOT that Cliffs already own - my guess is not very many. The net result is that Cliffs will want to own 17.3 million shares of NOT.
We should never forget that there is an advantage in having Cliffs a holder a 10% of the outstanding shares - with 10% fewer shares in circulation it will ensure that a major will have to pay top dollar in any attempt to purchase overall control of the company.
How will Cliffs gain their 10% ownership - by daily accumulation in the market or by a private placement like they did with KWG and FWR? It appears the larger NOT + FWR company will have lots of cash. My bet is that Wes will not do a private placement with Cliffs until the stock is much higher in value. This latest move by Wes may end up costing Cliffs big bucks.
JMHO,
AFS
