Sphere, Cape Lambert battle iron ore funding issues 4-October-07 by Andrew Hobbs
West Perth-based Sphere Investments Ltd has joined fellow iron ore developer Cape Lambert Iron Ore Ltd in hitting a potential funding crisis, after disclosing that one of its partners was reviewing its planned participation in a $415 million funding deal.
Sphere said that Saudi Arabia Basic Industries Corporation had requested a one month extension to its funding deal after concluding that the project did not meet its rate of return hurdle.
The news comes after Leederville-based Cape Lambert went into a trading halt while waiting for Chinese investor Ding Liguo to exercise 28 million options worth around $10.1 million in the company.
That conversion is the second tranche in a two-stage plan that would see Mr Ding's Chinese steel-making group Delong Holdings Ltd take a 13.25 per cent stake Cape Lambert for around $14.6 million.
The options exercise had been expected for August, but was delayed to September 30.
Today, Sphere extended the completion date for the SABIC-Qatar Steel acquisition of a a 49.9 per cent stake in its Guelb el Aouj iron ore project to October 31, allowing the Saudi Arabian company to review its financial analysis and key project assumptions.
According to the Sphere announcement, SABIC could not secure Board approval because the proposed investment did not meet the 18 per cent return on investment normally applied to their industrial projects, based on its financial assumptions.
Sphere had agreed to sell the stake in the joint venture, a mine in Mauritania, to SABIC and Qatar Steel for around $422.7 million (US$375 million) in July, with the deal due for completion by September 30.
Under the agreement, Sphere was to retain a 50.1 per cent stake in the project with JV partner SNIM, the Mauritanian national iron ore company.
CFE Price at posting:
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