A private Chinese company is planning to invest $100 million in two major iron ore projects that have been dormant for the best part of a decade - the Oakajee port in WA's Mid West and Sundance Resources' Mbalam Nabeba mine in Cameroon.
A private Chinese company is planning to invest $100 million in two major iron ore projects that have been dormant for the best part of a decade - the Oakajee port in Western Australia's Mid West and Sundance Resources' Mbalam Nabeba mine in Cameroon.
The investment by China's Western Australian Port Rail Construction (WAPRC) will be through ASX-listed AustSino Resources Group.
Under the agreement, WAPRC will acquire a 61 per cent stake and effective control of AustSino via the purchase of 7.6 billion shares at 1.3 cents each.
WAPRC’s major shareholders are Shanghai-based investors Li Ping and Qiu Yu Hu.
Both are involved in businesses within the industrial, property and technology sectors, and operate within the private sector.
WAPRC also invested $3 million in AustSino in January this year after the explorer relisted on the ASX.
Using the proceeds of the WAPRC placement, AustSino plans to acquire 50.8 per cent of Sundance for $58 million.
AustSino will acquire 62.5 million Sundance shares at 0.4 cents each as part of a first placement, followed by the purchase of 10.5 billion Sundance shares at 0.55 cents per share under the second placement.
Sundance will use $50 million from the AustSino investment to cancel $132 million worth of debt in exchange for a cash, share and option package.
The remaining $8 million will be used for working capital and to progress the Mbalam Nabeba iron ore project in Cameroon.
“This is a transformational deal for Sundance and its shareholders because it delivers in one agreement a partner in AustSino who has the foresight, credibility and business network to enable Sundance to advance development of the Mbalam-Nabeba iron ore project and the repayment of the outstanding convertible notes in a very acceptable manner,” Sundance chief executive Giulio Casello said.
The deal is subject to a number of conditions, including shareholder approval.
AustSino also invested $750,000 in Sundance last month, acquiring 187.5 million shares at 0.4 cents each.
The West Perth-based company said it would use the remaining $42 million across a range of projects, including $15 million to explore the proposed development of the Oakajee project.
The project comprised the construction of a deepwater port and rail infrastructure at Oakajee to facilitate the development of a number of iron ore projects in the Mid West, given Geraldton Port had capacity constraints.
An artist's impression of the Oakajee port project.
The Chinese-backed Yilgarn Consortium also bid for the project.
However, it was abandoned in 2013 due to a decline in the iron ore market.
Mitsubishi announced plans to sell its interest in the project in July, offloading subsidiaries Crossland Resources and Oakajee Port and Rail.
AustSino’s Peak Hill iron ore deposits are located about 650 kilometres north-east of Geraldton, and the company said in 2011 it acquired engineering studies and intellectual property in relation to the Oakajee project from the Yilgarn Consortium
The company has since spent a further $3 million on the IP and studies.
AustSino will also spend $15 million on expanding its existing iron ore tenements and identifying other potential projects in WA along with $8 million on working capital.
AustSino chairman Chun Ming Ding said the company was pleased to have secured the $100 million placement.
“AustSino and its investors are delighted that WAPRC is able to continue to support AustSino and its project partners in their efforts to identify and develop world-class opportunities in the Western Australian and central African iron ore sectors,” he said.
“AustSino will continue to work closely with WAPRC and its project partners to discuss and advance opportunities in the Western Australian and central African iron ore sectors for the mutual benefit of our investors and the people of those regions.”
Shares in AustSino last changed hands at 1.7 cents each, while Sundance shares last traded at 0.5 cents per share.