Australasian in Balmoral deal Spinifex JOHN PHACEAS After weeks...

Australasian in Balmoral deal

Spinifex

JOHN PHACEAS

After weeks of relative quiet, Pilbara magnetite hopeful Australasian Resources will today give investors welcome news of progress at its Balmoral South magnetite project near Cape Preston.

This comes just days after Hong Kong group Citic Pacific formally signed a $US1.1 billion ($1.4 billion) construction contract with China Metallurgical (MCC) for the neighbouring Balmoral deposit.

The company, formerly Sherlock Bay Nickel, has finally completed the acquisition of the mining rights to one billion tonnes of magnetite at Balmoral South from Queensland iron ore baron Clive Palmer, who last year pocketed $290 million when he sold Citic the

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Australasian completes acquisition of Balmoral mi ne rights


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rights to mine a billion tonnes of ore at Balmoral.

The deal with Australasian has delivered Mr Palmer a 77 per cent stake in the company, giving his private Mineralogy Group a window to the Australian equities market.

But Mineralogy will not be short of cash with Citic due to pay $US200 million more for the rights to another billion tonnes in July, and potentially another $US800 million if it exercises its rights to four billion tonnes more at Cape Preston.

Mineralogy also stands to pocket royalties of around $100 million a year once Citic’s Stage One venture comes onstream in 2009, rising to $600 million annually as the Hong Kong group develops the rest of its attributable magnetite resources.

More importantly for Australasian shareholders, the company has now received the final assays from resource and infill drilling at the site, which managing director Darren Hedley said would confirm a one billion tonnes-plus resource at the lease.

“We’ve got all the drilling back now, which I think basically will confirm the billion tonnes that we’ve got the right to mine, and we’ll see a corresponding increase in reserves,” he said. “That should be out in the next couple of weeks.”

Mr Hedley said Australasian also expected to finalise plans for an interim funding agreement in the next few weeks that would provide the company with sufficient cash to advance its project studies while it negotiated funding for the overall development.

Australasian was talking to several international consortiums to fund the development, and while it could have struck an attractive funding agreement already, the company believed it could achieve an even more attractive outcome by continuing talks with competing groups.

“If you’ve got a house worth $1.5 million, you don’t sell it for $1 million — you hold off until you get a better offer,” he said.

Mr Hedley said the benefits to Australasian of its relationship with Mr Palmer and Citic’s rapid progress at Balmoral should not be underestimated. Under the terms of its contract with Mineralogy, Citic was contractually obliged to provide third party access to its port infrastructure.

Australasian also had a memorandum of understanding with MCC to negotiate a possible construction contract for its own mine and pelletising facilities.

“Our crew is over there (in China) at the moment,” he said. “They’re keen to deal with us because obviously there are some synergies in building two projects close together.”

Despite Australasian’s progress, Mr Hedley would say only that its shares should resume trading “in the coming weeks”. The stock has been suspended since mid-December.