Sydney - Tuesday - April 4: (RWE Australian Business News) - As announced in December, Sherlock Bay Nickel Corporation Ltd (SHN) entered into an exclusive due diligence and negotiation agreement with Mineralogy Pty Ltd in relation to the potential acquisition of an advanced iron ore project in the western Pilbara region of Western Australia.
While due diligence continues, SHN reports Mineralogy has entered into a significant separate mining rights agreement with CITIC Pacific Ltd, a major Hong Kong based company with the Government of China the major shareholder.
The deal with CITIC Pacific covers the adjoining central block of the massive Balmoral magnetite deposit to that covered by SHN's proposed rights on the southern block, and will involve substantial port and related infrastructure facilities being developed at Cape Preston.
Under its agreement with Mineralogy, SHN's Project would have access to these facilities on a shared capital and operating cost basis.
Considering the Project's favourable location near the coast, the Balmoral magnetite's amenability to produce a very high grade concentrate and the ability to share infrastructure offers significant competitive advantages over many other magnetite projects.
SHN believes the Mineralogy agreement with CITIC is a significant milestone that supports the development of the Cane River project.
The Mineralogy-CITIC Pacific Agreement Under the terms of its announced agreement with Mineralogy, wholly owned subsidiaries of CITIC Pacific have agreed to acquire from Mineralogy rights to mine up to 6 billion tonnes of magnetite iron ore from the Balmoral deposit.
Initial rights to mine 1 billion tonnes of magnetite iron ore from the Balmoral magnetite deposit are being acquired by CITIC Pacific for US$215 million, rights to another 1 billion tonnes, subject to confirmatory drilling, are being acquired for US$200 million and rights to up to a further 4 billion tonnes of magnetite, subject to exploration drilling, are being acquired for US$200 million for each additional 1 billion tonnes.
Mineralogy will also receive a royalty on ore production by CITIC Pacific.
The agreed deal also anticipates capital expenditure of US$2.47 billion to be arranged by the CITIC Pacific group for the development of mining and processing operations, port and related infrastructure at Cape Preston.
Whilst CITIC Pacific has not at this stage provided details on the exact iron ore products they intend to produce, SHN understands that CITIC Pacific may bring in other Chinese steelmakers to participate in the project
SHN Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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