The iron ore trader Prosperity Mineral Holdings (PMH) has seen a sharp rise in its stock price after clarifying the reasons for a 15.8m pound investment.
In February the firm announced it was spending the money on acquiring a 5% stake in a company called All Wealthy Capital, (AWC), a holder of iron ore assets in Malaysia.
The move preceded a 15% decline in the value of the stock.
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Prosperity, now under pressure to explain the transaction, says AWC is planning a so called "liquidity event" within two years of the deal, which will mean either a public listing or it being taken over by a listed company. Obviously being a shareholder ahead of a listing may be good news for PMH.
The rationale for the deal is further strengthened, says PMH, by the "imperative" of having a reliable supply of iron ore. By taking a stake in AWC, Prosperity says it will be "guaranteed" 9.5m metric tonnes over ten years at a price which is calculated at 95% of the going rate.
Prosperity has also stated that the total value of AWC is $500m.
Shares in Prosperity Mineral Holdings had gained 6% by 10:37.
BS
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