BC Iron and Cleveland Mining Company have taken the first steps to securing the first three projects under the iron ore miners’ Brazilian strategic alliance.
The companies said today they had reached two agreements to acquire the rights to a controlling interest in three separate iron ore developments, in the Brazilian states of Salvado da Bahia and Minas Girais.
The memoranda of understanding give BC Iron and Cleveland the right to acquire up to an 80 per cent stake in the projects, under a staged-earn in process.
The first stage will comprise a $4 million minimum spend on exploration and assessment activities, if the companies choose to proceed.
The alliance between BC and Cleveland was announced in August last year, and has since assessed more than 50 potential iron ore developments, ranging from greenfields exploration to producing mines.
The companies said they selected the projects subject to the agreement based on outcropping iron mineralisation, geology, geophysical signatures and their proximity to port and rail transport networks, as well as positive local attitudes to mining developments.
Preliminary assessments show the projects have the potential to host more than 1 billion tonnes of a type of iron ore typical to Brazil, which is highly sought-after by steelmakers.
Cleveland managing director David Mendelawitz said the alliance with BC Iron would significantly de-risk long-term funding to advance projects earmarked for development.
“From Cleveland’s perspective, the acquisition of these projects assists greatly with the development of an attractive portfolio of highly prospective, long-term projects across multiple commodities,” he said.
BC Iron managing director Mike Young said the alliance and the agreements were a natural part of the company’s business development strategy.
“The deal structure is consistent with our approach to potential growth opportunities in Brazil; that is, the upfront expenditure is relatively small but increases with success and de-risking, and we maintain a tight, commercial relationship with the vendors, who have the in-country knowledge to assist with approvals and community liaison,” he said.
Mr Young said the agreement would not change the company’s focus on its Nullagine iron ore joint venture with Fortescue Metals Group, and other growth options in the Pilbara.
“This deal introduces early stage greenfield opportunities into the BC Iron stable which complements the Pilbara focus appropriately,” he said.
At 10:10AM, WST, BC Iron shares had gained 2 cents, trading at $3.13, while Cleveland Mining’s stock was down 1 cent, at 16 cents.
Meanwhile, Cleveland also announced today it was seeking legal advice after DJ Carmichael failed to produce the second tranche of a planned capital raising.