ASIC ‘aware’ of ‘unusual’ share price spike in the lead up to Fenix Resources’ $71m deal for Creasy’s CZR

Fenix Resources looks set to absorb an iron ore junior that is controlled by billionaire prospector Mark Creasy and was left in the lurch by Australia’s foreign investment umpire for more than a year. But the lead up to the white knight deal has raised eyebrows over at the nation’s corporate regulator. CZR Resources found a new suitor in Fenix after an agreement with the Chinese-linked Miracle Iron fell through following continuous delays in receiving approval from the Foreign Investment Review Board. The Fenix proposal has the blessing of Mr Creasy, but a bump in the road has emerged. The Australian Securities Exchange quizzed CZR why its shares jumped nearly 50 per cent in the days leading up to the Fenix deal being announced on Tuesday. Its stock price surged from 16.5¢ at Thursday’s close of trade to 24¢ by Monday’s close of trade, on the back of no news. CZR in response said it had been in discussions with Fenix about a potential deal since Christmas Eve but had no reason to believe those confidential discussions had leaked. An ASIC spokeswoman said the “unusual” price rise had caught its attention. “ASIC is aware of the matter and routinely looks at unusual price and volume movements ahead of material announcements,” she said. CZR boss Stefan Murphy told The West Australian he “is chomping at the bit” to find out who bought into the company to cause the price spike. “A large shareholder sold out earlier this month, which pushed the price down, and obviously someone has come in to fill that void,” he said. “We are a highly-illiquid stock so even small purchases increases our share price quite a bit. “But this (unusual share price movement) is the last thing we need after all the Miracle delays.” CZR since January last year had been waiting on the green light from FIRB to sell its majority stake in the Robe Mesa iron ore project for $102m to Miracle Iron. Miracle Iron is controlled by Chinese-Australian businessman Chuanshui (Frank) Yin and is linked to Chinese conglomerate XinJiang Jiangna Mining Corporation. Mr Murphy said FIRB had not communicated with his company for “months and months and months”. “We stopped receiving requests for information and as the FIRB approval kept getting delayed it became obvious the pin needed to be pulled (on the Miracle deal) even though they (FIRB) said nothing,” he said. “We’re super fortunate Fenix came on board with this new deal.” The $210 million-valued Fenix will use its scrip to acquire all of CZR at an implied value of 26.2¢ per CZR share. This will increase to 30¢ per CZR share if 75 per cent of the takeover target’s shares fold into the offer by March 21. The maximum offer puts a $70.8 million price tag on CZR. Mr Creasy, who controls more than 50 per cent of CZR, is backing the proposal tabled by John Welborn’s Fenix — a small-scale iron ore producer in the Mid West region. Mr Murphy said the all-scrip deal gives CZR’s shareholders upside to Fenix’s potential growth. CZR’s flagship Robe Mesa project in the Pilbara neighbours Rio Tinto’s Mesa F deposit. CZR owns 85 per cent of Robe Mesa — the company’s flagship asset — while Mr Creasy directly holds the other 15 per cent. The iron ore price has shed about a quarter of its value since the Miracle Iron deal for Robe Mesa was first announced last year. Shares in Fenix finished Tuesday down 4.9 per cent to 29¢ while shares in CZR rose 8.3 per cent to 26¢.