Murchison, Mitsubishi ink Mid-West deal Colin JacobyTuesday, 19...

Murchison, Mitsubishi ink Mid-West deal

Colin Jacoby
Tuesday, 19 June 2007

SHARES in emerging iron ore producer Murchison Metals have soared as much as 29% this morning after announcing that it has signed a deal with Japan's largest trading company Mitsubishi to develop iron ore and infrastructure businesses in Western Australia's Mid-West.



The port of Geraldton where Murchison Metals will ship iron ore from as part of Stage 1 development at its Jack Hills project


Murchison Metals drilling at its Jack Hills iron ore project

Murchison resumed trading today up 97c at $5 after being in a trading halt since Thursday. The stock reached an intraday high of $5.20 before slipping back to $4.92 with over 2.2 million shares already changing hands.

Late yesterday afternoon, Murchison said the agreement would provide for the creation of iron ore mining and infrastructure businesses to develop new multi-user and rail infrastructure in the Mid-West.

"The agreement envisages a total investment of approximately $A3 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 world-renowned development capabilities," Murchison said a statement.

Under the agreement, Mitsubishi will acquire 50% of Murchison's iron ore business, including its flagship Jack Hills project in the Mid-West, by way of an initial $150 million payment and additional investment based on a valuation of the project at the time the project expands to 25 million tonnes per annum.

According to Murchison, the deal will also witness the creation of an infrastructure business, Oakajee Port and Infrastructure, which will transport expanded production from the Jack Hills mine and other regional miners that are likely to emerge in the future.

"Today marks a very significant step forward towards the development of new Mid-West rail and port infrastructure," Murchison executive chairman Paul Kopejtka said.

"We believe the new infrastructure business will deliver the most cost-efficient transport and logistics solution for the Mid-West region."

Kopejtka said developing the required infrastructure in the shortest possible time frame was critical to the successful development of the Jack Hills project and other mines in the Mid-West if the region was to capture the current market window.

"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," Kopejtka said.

Murchison has a targeted production of 1.5Mtpa of iron ore from Stage 1 of its Jack Hills project, expanding to 2Mtpa in 2008.

The company is looking to ramp up the project's annual output to 25Mtpa in its Stage 2 expansion.