The Kerry Stokes-backed BCI Minerals has agreed to co-fund further development of the Iron Valley mine in the Pilbara, as part of a package of deals that will see Mineral Resources buy its Buckland project for up to $20 million.
BCI Minerals has been gradually disposing its iron ore assets while focusing on the planned development of its Mardie salt and potash project on the Pilbara coast.
In the interim, its main source of income is royalties from the Iron Valley mine - MinRes operates the mine and, to date, has sole funded its development.
BCI will contribute $25 million towards the cost of extending the mine life at Iron Valley, which has ore reserves of 89 million tonnes, though instead of making cash payments, it will rebate 40 per cent of the net royalties paid by MinRes.
The rebate is subject to BCI receiving a minimum net royalty of $1.5 million per quarter, giving the company some protection from low iron ore prices or reduced production.
The two companies have also struck an agreement for MinRes to purchase the undeveloped Buckland iron ore project, which has reserves of 134 million tonnes.
MinRes will pay $6 million upon completion of the purchase, due next month, and a further $14 million upon reaching certain milestones.
Under a third agreement, MinRes will bring forward a $4 million payment to BCI related to its 2018 deal to buy the Kumina iron ore deposit.
The payment was originally subject to production milestones.
MinRes managing director Chris Ellison welcomed the agreements.
"This latest series of agreements reflects our strong partnership with BCI and provide further opportunity for MRL’s Mining Services business to create value from stranded iron ore deposits in the Pilbara,” Mr Ellison said.
BCI managing director Alwyn Vorster said the $10 million in near-term cash payments further strengthened BCI’s cash position (which was $34 million at 31 December 2019) and solidified its focus on advancing the Mardie project.
The company is currently finalising a definitive feasibility study on Mardie, with a final investment decision due later this year.
BCI's share price dipped 4.5 per cent today to 10.5 cents while MinRes shares gained 6.9 per cent to $14.93.
Kerry Stokes private company Wroxby Pty Ltd is BCI's largest shareholder with a 29.3 per cent stake.
