Cazaly links with BHP as Forrest chases stakeMICHAEL WEIR...

Cazaly links with BHP as Forrest chases stake

MICHAEL WEIR


Interests associated with Andrew Forrest are rumoured to have grabbed a major stake in Cazaly Resources as the iron ore hopeful stitched up a deal with BHP Billiton over the disputed Shovelanna project.

Cazaly is expected to announce as early as today a deal that will see BHP Billiton buy any iron ore produced from Shovelanna, which Cazaly pegged in August when BHP Billiton's Pilbara arch rival Rio Tinto forgot to renew a tenement licence in time.

Cazaly shares raced 44¢ higher to $1.50 yesterday amid a flurry of buying before the company called a trading halt ahead of the planned BHP Billiton deal announcement.

Market insiders said the Sydney office of Perth broking firm Patersons Securities had bought close to six million shares, or about 14 per cent of Cazaly in aggressive trading in the past two weeks.

Market speculation centred on Andrew Forrest's Fortescue Metals Group or interests associated with the company as having built a stake in the lead-up to launching a possible takeover.

It is also understood Fortescue has threatened legal action against Cazaly over the ownership of the Shovelanna project.

But Fortescue operations director Graeme Rowley said the company had taken no action "at this stage" against Cazaly in relation to Shovelanna.

Cazaly managing director Nathan McMahon refused to comment yesterday but a BHP Billiton spokesman confirmed plans to negotiate a memorandum of understanding with Cazaly.

The spokesman said it was a logical step given Shovelanna was next door to BHP Billiton's operating Orebody 18 mine, but any deal would be conditional on the granting of the mining lease and technical and legal due diligence.

Cazaly is now expected to use the BHP Billiton alliance to argue against Rio Tinto's pitch to the State Government that it was not in the public interest for a junior company to get the project.

Last week Cazaly signed a letter of intent with big London investment bank Investec to arrange development finance on completion of a bankable feasibility study.

The deal with BHP Billiton and the backing of Investec adds further weight to Cazaly's argument that the project was capable of being developed in the junior's hands and was potentially lucrative for WA.

Cazaly pegged the Shovelanna leases in late August after Rio Tinto failed to renew its licences by the required deadline.

Since being caught out Rio has formally lobbied State Development Minister Alan Carpenter to reject Cazaly's application for the leases. Rio said the Minister had wide discretion ary powers and it was not in the public interest to strip it of the project.

However, Cazaly argues the mining giant has sat on the Shovelanna leases for 16 years and in that time has not drilled a single exploration hole.

Cazaly and its exploration partner, Echelon Resources, plan to spend $6 million on exploration at Shovelanna and have already finished a preliminary scoping study that has confirmed the viability of three separate development options.




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