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EVERYTHING GOING FOR IT EXCEPT THE MARKET TUMBLE LAST WEEK

Sydney - Tuesday - August 21: (RWE Aust Business News)
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OVERVIEW
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Murchison Metals Ltd (ASX:MMX) is a good example of what has happened to mining explorers swept up in last week's turmoil.
The company had everything going for it except one special ingredient and that was investor confidence in the market.
On the very day that Murchison Metals announced the signing of definitive agreements with Mitsubishi the shares fell out of bed, - down to $3.65 from $4.07 the previous day.
This was the day markets started to go horribly wrong, but not for major financial problems in local companies.
Buyers virtually vanished overnight only return yesterday.
On Friday Murchison closed at $3.03 but yesterday recovered 53c to $3.60.
The news last Wednesday reported the establishment of new iron ore and infrastructure businesses in the mid west region of Western
Australia with Mitsubishi Development Pty Ltd (MDP), a wholly owned subsidiary of Mitsubishi Corporation, which will take place on September 19.
The agreement envisages a total investment of about $3 billion to be funded utilising equity capital to be contributed by Mitsubishi and a
debt funding package, the arrangement of which will be managed by Mitsubishi leveraging its global financial resources and development capabilities.
Mitsubishi has agreed to acquire 50 per cent of Murchison's iron ore business including Murchison's flagship Jack Hills project, a potentially world-class operation planned for expanded production to 25
million tonnes per annum of high-grade direct shipping iron ore.
The agreement also provides for the stablishment of a dedicated infrastructure business to develop new multi-user port and rail infrastructure in the mid west.
With a current market capitalisation of about $1.3 billion, Murchison is the largest of the emerging iron ore producers in the mid west region.
Together with Mitsubishi (market capitalisation of about $US40 billion) the iron ore and infrastructure businesses will have the financial and operational capability to undertake new regional development.
Murchison executive chairman Paul Kopejtka said that the signing of the agreement with Mitsubishi represented a landmark event for Murchison, the entire mid west region and for Western Australia.
"The creation of this formidable business relationship with Mitsubishi should ensure that Murchison realises its ambition to become a
world-class iron ore and infrastructure company," he said.
"Utilising Mitsubishi's strong balance sheet and access to best-in-class expertise crucial to developing mine and infrastructure businesses, this agreement not only facilitates the accelerated and successful development of the expanded Jack Hills project, but also best positions Murchison to take a significant equity position in a new mid west infrastructure business.
"With Mitsubishi's wealth of experience in mine and
infrastructure businesses and this commitment to effectively underwrite mine and infrastructure development costs that are likely to approach $3
billion, the infrastructure business established by Murchison and Mitsubishi will allow the rapid advancement of the mid west region.
"We are delighted to have secured Mitsubishi as our business partner and look forward to a long and successful business relationship," Mr Kopejtka said.

SHARE PRICE MOVEMENTS
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Shares of Murchison yesterday retrieved 53c to $3.60. Rolling high for the year is $6.24 and low 63c. The company has 361.2 million shares on issue with a market capital of $1.3 billion.
Mitsubishi has enjoyed a successful track record over many years in Western Australia.
It was one of the early investors in the Pilbara and is presently a partner with Rio Tinto in the Hismelt iron ore downstream processing plant in Kwinana.
It also holds an important interest in the North West Shelf oil and gas venture.
Murchison Metals says the new iron ore mining business will be conducted through Iron Jack Ltd, which is currently a wholly owned subsidiary of Murchison.
Mitsubishi has agreed to acquire a 50 per cent interest in Iron Jack by purchasing existing shares from Murchison and subscribing for new shares in Iron Jack.
The consideration payable by Mitsubishi will comprise a combination of an up-front payment of $150 million, which is payable on signing of related transaction documents (expected prior to the end of
September) together with an additional amount payable when construction of the expanded Jack Hills project is set to commence.
Murchison will receive about two thirds of the initial payment.
After receipt of these funds, Murchison will be debt free and have significant cash reserves of approximately $45 million to $50 million, depending on when the initial payment is actually made.
Approximately one third of the initial payment will be paid to Iron Jack in consideration for the issue of new shares to Mitsubishi.
Following receipt of this payment by Iron Jack, it will be owned 50 per cent each by Murchison and Mitsubishi.
It is expected that this equity injection will provide Iron Jack with sufficient cash reserves to fully fund the completion of all studies and activities required prior to the commencement of the expansion of the
Jack Hills project and construction of associated infrastructure.
The deferred payment will be based on the value of the Jack Hills project at the time that the Jack Hills expansion is set to commence, less half of the initial payment.
The effect of this arrangement is that Murchison will contribute to the Jack Hills project and Mitsubishi will contribute an agreed value in cash to earn their respective 50 per cent interest in the new iron ore
business.
Based on current estimates, the deferred payment is expected to be sufficient to meet the equity funding requirements for the planned
expansion of the Jack Hills project to 25 Mtpa of direct shipping ore and the development of the associated rail and port infrastructure.
Any further equity capital required would be contributed on a 50:50 basis.
Murchison and Mitsubishi have also established a new infrastructure business, Oakajee Port & Infrastructure, to be managed by an experienced independent infrastructure management team with technical secondees from Mitsubishi where required.
This business will transport expanded production from Jack Hills and other regional miners that are likely to emerge in the future.
Oakajee Port & Infrastructure is ideally placed to develop the required infrastructure in the shortest possible timeframe.
Murchison is being advised by Gresham Advisory Partners Ltd and Freehills.
Mitsubishi is being advised by Macquarie Bank, The Minera Group and Mallesons Stephen Jaques.

BACKGROUND
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Murchison Metals was listed on the Australian Stock Exchange on April 1, 2005.
The company owns 100 per cent of the Jack Hills project located in the northern corridor of the mid west region of Western Australia.
The Jack Hills project contains a number of deposits of high grade hematite ore. Murchison's high grade hematite ore can be mined and shipped directly to customers without further processing or
concentration, which significantly improves the economics of the project.
Mining at Jack Hills began in late 2006 involving initial production of 1.5 million tonnes of iron ore per annum expanding to two million tonnes per annum in 2008.
Through an expansion of the Jack Hills project, Murchison proposes to increase annual production of up to 25 million tonnes per annum.
Iron ore would be railed to a new port facility at Oakajee north of Geraldton for export to customers in Asia.
The company is aiming to create shareholder wealth through mining and exporting high quality iron ore to world markets.
Murchison has a strong, experienced and energetic hands-on management team dedicated to transforming the company into a significant
supplier of iron ore, taking advantage of current strong demand for high quality iron ore in major Asian markets.
Jack Hills boasts a significant high-grade iron ore resource that is suitable for low cost open pit mining.
The company's Stage 2 project is now well advanced and involves increasing production up to 25 Mtpa from 2010.
Murchison has a strategic alliance executed with South Korean major POSCO with a committed sales contracts for the first five years of production.
Murchison has a strong value upside from Stage 2 in the POSCO alliance.
POSCO has now invested $18 million in Murchison Metals which gives it 12 per cent of the company.
The alliance created Oakajee Port & Infrastructure which is ideally placed to develop the required infrastructure in the shortest possible timeframe.
The project specifics give a distance of 380 kms northeast of Geraldton.
Jack Hills potential mineralisation is estimated at 380 Mt at 62 per cent Fe with current resources of 67 Mt at 62 per cent Fe, although this will soon be updated.
ENDS

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