Flinders Mines Says Magnitogorsk Delays Decision On Loan Agreement

Bid target Flinders Mines Ltd. (FMS.AU) said Wednesday that Magnitogorsk Iron & Steel Works (MAGN.RS) has postponed a decision on the execution of a loan facility agreement that had been planned as part of the A$554 million takeover of the Australian company.

Magnitogorsk has lodged a motion with an arbitration court in Russia's Chelyabinsk region seeking to discharge an injunction that had been secured by one of the Russian steel producer's shareholders halting approval of the takeover deal, Flinders said in a statement to the Australian securities exchange. It said the motion is likely to be heard by Friday.

Magnitogorsk early this month said an injunction had been sought by Elena Egorova, who says the transaction discriminates against her interests as a shareholder, since it allegedly will lead to financial and operational risks for Magnitogorsk. It didn't say how many Magnitogorsk shares Egorova owns.

Flinders shareholders in late March voted in favor of Magnitogorsk's A$0.30 a share cash offer, and the deal only needs approval by the Federal Court of Australia.

Flinders's flagship asset is a project in the west Pilbara, some 687 miles north of Perth in an area dominated by iron ore giants BHP Billiton Ltd. (BHP) and Rio Tinto PLC (RIO). A pre-feasibility study has estimated a mine that could produce 15 million metric tons of ore a year at a cash operating cost of A$35 a ton, significantly below the current spot market price for the commodity even after a recent fall.

-By Robb M. Stewart, Dow Jones Newswires; [phone]; [e-mail]