Arrium slaughtered on rights issue (updated)

Uh oh, iron ore carnage:

Mining and steel group Arrium has launched a $754 million capital raising to repair its stretched balance sheet as the iron price plunge casts uncertainty over the company’s earnings.

Arrium chairman Peter Smedley, who is stepping down this year to be replaced by Jerry Maycock, said the raising puts the company in a better position for “current markets”.

…The entitlement offer price of 48 cents per share represents a 26 per cent discount to Arrium’s closing share price on Friday.

This business is going out the back door if Deutsche’s estimate of $89 break even for the iron ore division is right:

Question is, why would anyone in their right mind buy, even at such a huge discount?

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.