Atlas enters infrastructure sharing deal

17/02/2009 - 13:57

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Atlas Iron says it has the opportunity to defer $20 million in mine establishment costs after it entered into a deal to access infrastructure that can support its Abydos iron ore project in the Pilbara.

Atlas enters infrastructure sharing deal

Atlas Iron says it has the opportunity to defer $20 million in mine establishment costs after it entered into a deal to access infrastructure that can support its Abydos iron ore project in the Pilbara.

Atlas has signed a binding heads of agreement with Talison Minerals to access nearby infrastructure at the Wodgina tantalum mine, which was not been in operation since December when mining activities were suspended.

Talison previously said the suspension was driven by a severe downturn for consumer electronics, of which tantalum is used for production.

Atlas said the agreement provides it with a significantly lower start up cost for a 2 million tonne per annum operation and provides an option for it to upgrade the infrastructure to underpin a larger operation.

Under the deal, Atlas will use 50 per cent of the mine's infrastructure capacity until at least the end of 2010 for an initial payment of $3 million, payable in shares, plus pay a monthly fee.

The issue price of the shares will be calculated at a 5 per cent discount to the five day volume weighted average price prior to the formal agreement.

Additionally, Atlas must elect to use the Wodgina infrastructure before October 1 this year and must start use before January 1 2010.

Atlas will also help with the redeployment of Talison personnel.

"It is an opportunity to start our second iron ore project at significantly lower cost, limit the environmental impact of our operations and maintain and create further employment opportunities," Atlas managing director David Flanagan said.

"It is a good deal for Atlas and Talison and we look forward to Talison recommencing operations in the future so that both companies can further benefit from the economies of scale of a much larger operation."

 

 

The announcement is below:

 

 

Atlas Iron Limited (ASX Code: AGO) is pleased to announce that it has entered into binding Heads of Agreement (HOA) with Talison Wodgina Pty Ltd (Talison) a wholly owned subsidiary of Talison Minerals for the use of infrastructure at the Wodgina Mine to support the commencement and expansion of Atlas' Abydos Project development. Talison owns the Wodgina tantalum mine and associated infrastructure, which is located 100 kilometres by road south of Port Hedland, in the Pilbara of Western Australia. Atlas owns 100% of the Fe rights to the tenements immediately adjacent to the Wodgina tantalum mine.

The agreement provides Atlas with access to infrastructure that can support an iron ore project at a significantly lower cost than a new start up project. It provides a framework where Atlas will pay a fee for access based on fixed and variable charges. Atlas can also elect to upgrade this infrastructure to underpin a much larger operation at some time in the future.

"Operations at the Wodgina tantalum mine were suspended in December 2008. It is an opportunity to start our second iron ore project at significantly lower cost, limit the environmental impact of our operations and maintain and create further employment opportunities," commented David Flanagan, Atlas Managing Director.

"It is a good deal for Atlas and Talison and we look forward to Talison recommencing operations in the future so that both companies can further benefit from the economies of scale of a much larger operation."

Both parties are immediately legally bound by the terms set out in this HOA. Summary of the material terms of the binding HOA

 Atlas can utilise the Wodgina mine and infrastructure, for 50% of its capacity (being approximately 2Mtpa crushing and screening capacity).

 The term of the agreement where Atlas has access to 50% of the capacity will continue until at least 31 December 2010 and may continue indefinitely by mutual agreement.

 Atlas will pay Talison an initial payment of $3,000,000 payable in Atlas ordinary shares at an issue price calculated at a 5% discount to the 5 day VWAP prior to the formal agreement.

 Atlas must elect to use the Wodgina infrastructure before 1 October 2009 and, on election, Atlas must commence use before 1 January 2010.

 Atlas agrees to a take or pay arrangement for the capital and fixed costs of the capacity for a monthly fee.

 If Talison chooses not to extend the term of the agreement, Atlas may, at its cost, incrementally increase the capacity of the Wodgina infrastructure.

 The intention of the agreement is that the Wodgina infrastructure over time will be able to meet the operating requirements of both Talison and Atlas.

 Atlas will endeavour to assist with the redeployment of Talison personnel either by way of secondment or on such other basis acceptable to Atlas for the purpose of its activities

 The parties will enter into a formal agreement within 60 days of the date of this HOA.

Atlas recently announced the discovery of the Anson deposit, located less than two kilometres from the Wodgina crush and screen plant. Atlas recommenced a 360 hole programme of RC drilling in early February 2009 within a four kilometre radius of the plant. Due for completion in March 2009, geology intersected in drilling completed to date has been encouraging and the Company anticipates further encouraging results later in the year.

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