strategic alliance with cleveland cliffs

AusQuest Agrees Strategic Alliance with Cleveland-Cliffs


AusQuest has reached agreement on a Strategic Alliance with Cleveland-Cliffs

Cleveland-Cliffs to acquire a 30% interest in AusQuest

Cleveland-Cliffs to make an initial $26 million subscription at $0.40 per share

Subscription monies to aggressively accelerate the exploration of AusQuest’s portfolio of projects
in Australia
Diversified Australian exploration company AusQuest Limited (“AusQuest”, or “the Company”,
ASX: AQD) is pleased to announce that it has entered into a Strategic Alliance with Cliffs Australia
Holdings Pty Ltd, a wholly-owned subsidiary of international mining company Cleveland-Cliffs Inc
(“Cleveland-Cliffs”).
Headquartered in Cleveland, Ohio, Cleveland-Cliffs is the largest producer of iron ore pellets in North
America and a major supplier of metallurgical coal to the global steel-making industry. It operates six
iron ore mines and three coking coal mines in North America, and also owns 85% of Portman
Limited, a large iron ore mining company in Australia serving Asian markets. Cleveland-Cliffs
currently has a market capitalisation of approximately US$9.5 billion.
Transaction Structure
Under the agreement reached today, Cleveland-Cliffs will acquire a 30% fully diluted interest in
AusQuest through a staged issue of shares and options.
AusQuest will issue Cleveland-Cliffs with 21,590,000 options with an exercise price of $0.40 per
share and an expiry date of around 31 March 2011. This initial issue of options will occur pursuant to
AusQuest’s 15% placement capacity in accordance with ASX Listing Rule 7.1 with allotment
expected to occur within the next 5 days.
Subject to AusQuest shareholder and FIRB approval:
o Cleveland-Cliffs will subscribe for 66.7 million new AusQuest shares at $0.40 per share for a
total subscription price of $26 million;
o Cleveland-Cliffs will be issued approximately 29 million additional options with an exercise
price of $0.40 per share and an expiry date of around 31 March 2011 to increase Cleveland
Cliff’s fully diluted interest in AusQuest to 30% post the placement; and
o Under the Strategic Alliance, Cleveland-Cliffs will appoint a representative to the AusQuest
board.
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Among other things, the Strategic Alliance Agreement also:
o gives Cleveland-Cliffs the right to support future capital raisings by AusQuest;
o grants Cleveland-Cliffs certain rights in relation to any future sale or other disposal of
AusQuest’s assets;
o confirms Cleveland-Cliff’s intention not to acquire further shares in AusQuest (other than in
certain agreed circumstances) until the earlier of 30 November 2010 and the 2010 AusQuest
Annual General Meeting.
Commentary
Commenting on the transaction, AusQuest’s Managing Director, Graeme Drew, said: “We are very
pleased to announce this landmark Strategic Alliance and we look forward to welcoming Cleveland-
Cliffs to our share register and working closely with them to progress both our existing exploration
portfolio and new opportunities”.
“The investment by Cleveland-Cliffs and formation of a Strategic Alliance validates the exploration
strategy that AusQuest has been pursuing by targeting potentially significant discoveries in worldclass
mineral provinces and represents a strong endorsement of the quality of our exploration team”.
“The $26 million cash injection will provide us with substantial funding to implement a very
significant exploration campaign over the next three years, enabling us to do justice to the exciting
results we have achieved at our Table Hill project in the Pilbara and our Diamantina Project in
Queensland and to accelerate activity at our other key exploration assets”.
The President and CEO of Cliffs Asia-Pacific Pty Ltd, Richard Mehan said:
“Cleveland-Cliffs is delighted to have the opportunity to invest directly into AusQuest and to work
with AusQuest’s board and management through the Strategic Alliance we have entered into today.
AusQuest has a first class exploration portfolio and we believe that the quality of that portfolio,
coupled with the talent and experience at all levels of the company, will provide many opportunities
for future exploration success and subsequent project development. We are looking forward to
developing a long and mutually beneficial relationship with the AusQuest team.”
A meeting of AusQuest shareholders is expected to be held in October to seek the approvals needed to
complete this transaction. Ausquest will distribute a Notice of Meeting in due course to all
shareholders, which will include further details about the Strategic Alliance together with an
Independent Expert’s Report.
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For comment call:
Graeme Drew
Managing Director
AusQuest Limited
Phone: 08 9364 3866
Corporate Adviser:
Grey Egerton-Warburton
Lead Director – Corporate Finance
Hartleys Limited
Phone: 08 9268 2851
Media:
Nicholas Read
Managing Director
Read Corporate
Phone: 08 9388 1474