re: balla balla close to sherlock nickel

ASX Code
Issued Shares: 50.79M
Fully Diluted Shares 88.11M
: AXO
Cash on Exercise
of Options $12.32M
12mth range:
Cents 0.46 - 0.75
Contact Details:
1/ 245 Churchill Ave
SUBIACO WA 6008
Tel: +61 8 9382 4477
Fax +61 8 9382 2012
[email protected]
www.aurox.com.au
ABN: 32 106 793 560
Enquiries to:
Managing Director
or
Executive Director
Phone +61 8 9382 4477
Charles Schaus
Mick Sillc#ck
Aurox Resources Limited
Charles C Schaus
Managing Director
05 September 2006
e-lodgement
Company Announcements Office
Australian Stock Exchange Limited
2 The Esplanade
PERTH WA 6000
Aurox Forges Alliance with Major Chinese
Steel & Construction Companies
Aurox Forges Alliance with Major Chinese
Steel & Construction Companies
• Chengde Iron & Steel / China Metallurgical Group sign
“Heads of Agreement” with Aurox to farm into Balla Balla
Vanadium and Iron Ore projects.
$53.6M to acquire 30% of Balla Balla Vanadium project,
51% of Titanomagnetite Iron Ore project and 6M AXO
shares.
Chengde / MCC to purchase 70% of annual ferro-vanadium
production for life of project.
Chengde / MCC to purchase a minimum of 2M tpa titanomagnetite
iron ore for life of project.
•
•
•
ASX Announcement - 5 September 2006
Aurox Resources Limited
ASX ANNOUNCEMENT
Aurox Resources Limited
Summary
Aurox Resources Limited (“Aurox” and the “Company”) advises it has entered into a Heads of Agreement (“HoA”) with
Chengde Iron&Steel Group Co Ltd (“Chengde”) and China Metallurgical Group Corporation (“MCC”) . The HoA outlines
the principles for a joint venture in relation to the Balla Balla Vanadium and Iron Ore Projects in addition to proposed share
placement, convertible note terms and product offtake arrangements. Pursuant to the terms of the HoA, the parties intend to
negotiate formal agreements for execution by the end of September which will be subject to a number of proposed conditions
precedent as outlined below.
As previously announced to ASX, in April 2005 Aurox entered into the Balla Balla Option Agreement whereby it gained the
right to undertake a bankable feasibility study for the mining and production of vanadium-pentoxide and ferrovanadium. Under
the terms of the Balla Balla Option Agreement, Aurox may acquire the project from the vendors for $15m to acquire a 100% equity
interest (subject to royalties) in the project and effect transfer of the tenements the subject of the option agreement following
completion of the BFS.
- left to right: ,
,
1. Background
Front row - left to right: Chairman Tian Zhiping (Chengde Iron&Steel), President Shen Heting (China Metallurgical Group Corporation),
Managing Director Charles Schaus (Aurox Resources) and Executive Director Mick Sillc#ck (Aurox Resources)
2nd row General Manager Zou Weimin (MCC Overseas) Marketing Director Philip Kirchlechner (Aurox Resources),
President Wang Xiufeng (China 22nd MCC) David Yupeng (MCC Overseas) .
ASX Announcement page 2
ASX ANNOUNCEMENT
Aurox Resources Limited
strike
Under the HoA, Chengde/MCC will farm into the Balla Balla Vanadium and Iron Ore Projects via cash payments of AUD20
million following completion pursuant to the Balla Balla Option Agreement. Chengde/MCC will also provide funding of
AUD33.6 million by way of a convertible note and a share placement. The HoA also provides for Chengde/MCC to purchase by
way of proposed offtake arrangements 70% of the Balla Balla Ferro Vanadium production and a minimum of 2,000,000 tpa
of titanomagnetite iron ore concentrate for the life of the Vanadium and Iron Ore Projects respectively.
Chengde / MCC will make an initial farm-in cash payment to Aurox of AUD5 million to earn 10% equity in the Balla Balla Vanadium
Project and 20% equity in the Balla Balla Iron Ore project.
Chengde / MCC will advance the sum of AUD16.8 million to Aurox at favourable commercial rates by way of a convertible note
(“Note”). At the election of Aurox, the Note may be redeemed by cash settlement or by the issue of 3,000,000 fully paid Aurox
shares no later than October 2010.
Following the completion of Stage 1 both Chengde and Aurox will be responsible for meeting all cash calls made by the Joint
Venture as to their respective interests in each of the projects. The Stage 1 payments will be used to continue the rapid development
of the Balla Balla Vanadium project toward production and to commence a detailed study into the mining, beneficiation and
shipping of titanomagnetite concentrate to the Chengde operations in China.
and prior to the end of September.
Background (cont.)
The 16 kilometre Balla Balla titanomagnetite horizon currently hosts a JORC compliant resource of 303 million tonnes grading
0.65% V2O5, 43% Fe and 13% Ti. The horizon includes the Vanadium Project which is the focus of a Bankable Feasibility Study
(“BFS”) for the mining and production of ferrovanadium and vanadium pentoxide over the next 30 years. The BFS is scheduled
for completion later this month. The Iron Ore project includes the 11 kilometres of titanomagnetite located beyond the BFS
limits where further drilling and a subsequent feasibility study for the production of iron ore concentrate are proposed to be carried
out.
Chengde/MCC will make a second farm-in cash payment of AUD15 million to earn a further 20% equity in the Vanadium
Project and a further 31% equity in the Titanomagnetite Iron Ore Project. In addition, Aurox will place 3,000,000 shares to
Chengde/MCC to raise AUD 16.8 million.
Upon completion of Stage 2, the parties participating interests will be:
the Balla Balla Vanadium Project, Aurox =70%, Chengde/MCC = 30%
the Balla Balla Iron Ore Project, Aurox = 49%, Chengde/ MCC = 51%
Following the completion of Stage 2 both Chengde/MCC and Aurox will be responsible for meeting all cash calls made by
the Joint Venture as to their respective interests in each of the projects.
As outlined above it is intended that Chengde/MCC and Aurox will negotiate formal Joint Venture, offtake, convertible
note and share placement documentation as soon as possible
2.0 Details of HoA
2.1 STAGE 1
2.2 STAGE 2
ASX Announcement page 3
ASX ANNOUNCEMENT
Aurox Resources Limited
2.3 Conditions Precedent
65
The HoA is subject to a number of conditions precedent including:
(a) all necessary shareholder and regulatory approval (including ASX or FIRB approval); and
(b) negotiation and execution of necessary documents including the Note deed, JV and share placement agreement
(c) the completion of the vanadium feasibility study and viewing of the documentation by Chengde/MCC.
The Joint Venture Agreement (”JV”) will be subject to a number of conditions precedent including:
(a) approval by the Boards of each party to the terms of the JV; and
(b) necessary regulatory and shareholder approvals.
The parties have agreed to negotiate in good faith to enter into the Note deed, the share placement agreement and JV agreement
on or before 30 September 2006.
While the HoA is expressed to be binding, the parties must satisfy the conditions precedent before the HoA can proceed.
All parties have expressed a desire to commence project implementation and construction as soon as practically possible.
Aurox Resources Limited and its wholly owned subsidiary Ferro Metals Australia Pty Ltd are in advanced BFS for the
development of the Balla Balla vanadium project located in the Pilbara Region of Western Australia. Balla Balla is Australia's
largest and highest grade vanadium reserve, having a proposed mine life of over 30 years. The vanadium is hosted by an ironrich
titanomagnetite which has the potential for blast furnace hot metal production. The project is located adjacent to key
infrastructure including gas and grid power and is within 90kms of Australia's largest iron ore shipping facilities at Port
Hedland and Karratha. The project's technical risk is limited as confirmed from extensive metallurgical pilot testwork
which shows Balla Balla ore delivers the highest process yields of any Australian vanadium deposit.
Chengde is part of Tangshan Iron and Steel Group Ltd (“Tangshan”), the second largest steel producer in China, and
according to the International Iron and Steel Institute, Tangshan ranked globally as the 12th largest steel producer in 2005.
Chengde is one of the world's major vanadium producers making vanadium slag as a bi-product of steel making with titanomagnetite
ore concentrate.
MCC is one of China's largest construction and engineering groups and has been involved in all of China's major metallurgical
construction projects, including steel and vanadium production plants. MCC has total stated assets of approximately
RMB billion and employs over 56,000 technical and managerial personnel including 6,000 senior professionals. MCC has
designed and built a number of strategic steel operations including the Baosteel Complex, Anshan Steel Works, Wuhan Iron
&Steel Plant, Panzhihua Iron&Steel Plant, the Tangshan and Chengde Steel works.
Project and Party Details
ASX Announcement page 4
The Balla Balla Mineral Resources was estimated by Mr Terry Butler-Blaxell of Excelsior Minerals Pty Ltd, who has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he
is undertaking to qualify as a Competent Person as defined in the Australasian Code for the Reporting of Exploration Results,
Mineral Resources and Ore Reserves. Mr Butler-Blaxell consents to the inclusion in this report of the above Resource information
in the form and context in which it appears.
Comprehensive technical and financial information regarding the Balla Balla vanadium project can be found on the Aurox website
www.aurox.com.au along with recent independent project research carried out by RM Research Pty Ltd
Competent Persons Statement:
ASX ANNOUNCEMENT
Aurox Resources Limited
ASX Announcement page 5