It has been a hectic time of late for South Perth-based Aztec Resources Ltd, with the iron ore explorer signing sales contracts, revising its ore reserves and opposing a takeover bid.
It has been a hectic time of late for South Perth-based Aztec Resources Ltd, with the iron ore explorer signing sales contracts, revising its ore reserves and opposing a takeover bid.
Last week, the company signed a long term contract with Japan’s Marubeni Corporation for an annual sale of one million tonnes.
The announcement came less than a month after the company signed a 15-year supply contract, its first sales contract, with China-based shareholder CITIC Australia Commodity Trading Ltd for 1.5mtpa.
“We now have two long-term iron ore contracts with Japanese and Chinese majors groups, which will assist us to finalise the balance of the funding requirements for the construction of the Koolan Island Project,” Aztec managing director Peter Bilbe said.
Marubeni had previously agreed to provide Aztec with up to $20 million in project development funds earlier this year.
The terms of the sales contract include the annual sale of 1mt based on a full production rate of 4mtpa for up to 15 years or the life of the mine, whichever is less.
Aztec also advised that additional sales contracts were currently under negotiation. These were announced prior to Aztec raising its iron ore reserves for its Koolan Island iron ore project, and the company recommending its shareholders reject Mount Gibson Iron Ltd’s $248.2 million off-market scrip takeover bid in its recently released target statement.
The 2.6mt Koolan Island upgrade takes reserves to 24.8mt, with production expected in begin in December, while total development costs for the project have increased by $8 million to $133 million due to cost increases in raw materials, fuel, a shortage of appropriate plant and equipment and other cost variations.
The reasons behind the rejection were that the offer was inadequate as it did not reflect the strategic importance of the Koolan Island Project to Mount Gibson, and that the offer was opportunistically timed to take advantage of Aztec in the period prior to commencement of production at Koolan Island.
The Aztec Board had serious concerns about the management capability of Mount Gibson because it failed to meet its 2005-06 profit forecast of $48.9 million, reporting a profit of $23.5 million.
Aztec was also concerned about Mount Gibson's ability to expand its existing Tallering Peak mine as it had planned and said it would be exploring alternative options to Mount Gibson's offer in order to maximise shareholder value.
Aztec recently approached the Takeovers Panel, saying Mount Gibson had not provided information in its bid of a forecast net profit after tax for the first half 2006-07.
The panel said it intended to dismiss the application once it was satisfied that Mount Gibson had complied with this undertaking.
