15/01/2010 - 00:00

Big wins for small players

15/01/2010 - 00:00

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THE Nullagine joint venture between BC Iron and Fortescue Metals Group raised initial concerns as the former agreed to exchange half of the mine for use of the latter's rail line, port-handling and ship-loading facilities.

Big wins for small players

Strategic deals
THE Nullagine joint venture between BC Iron and Fortescue Metals Group raised initial concerns as the former agreed to exchange half of the mine for use of the latter's rail line, port-handling and ship-loading facilities.
But with the results of trial mining exceeding expectations, opinion is firming that BC Iron wasn't necessarily hard done by.
"Getting rail access in exchange for equity? Some say they have sold the farm, but perhaps 50 per cent of something is better than 100 per cent of nothing," one investment adviser told WA Business News.
The first commercial production is expected by the end of the year, offsetting the high price BC Iron paid for its promotion from mine owner to producer. The Pilbara mine is expected to produce iron ore at double the rate of its original plans after Fortescue fast-tracked the development of its Christmas Creek rail line.
There was no mention that iron ore junior Iron Ore Holdings was hard done by when it signed a deal with mining giant Rio Tinto.
Under the negotiated sales deal, Iron Ore Holdings will sell 1.5 million tonnes per annum of iron ore from its Phil's Creek venture in the Pilbara. The company said that the commercial arrangements resulted in a net present value for the project of $40 million to $60 million.
The deal is a source of encouragement - or envy - to other junior miners in the region hoping to seal similar deals with mining heavyweights. Rio has benefitted by obtaining a source of ore to blend with its products from its Pilbara operations.
A separate agreement includes plans for an exclusive six-month negotiating period for Rio to investigate the junior's Iron Valley deposit, which is located near the mining giant's Yandicoogina mine.
Better known for his media interests, Kerry Stokes controls the iron ore junior through his Wroxby investment vehicle. Shares in Iron Ore Holdings have increased six-fold during the past 12 months.
Another mining giant, BHP Billiton, was involved in an important deal for the state during 2009, with the sale of its nickel project in Ravensthorpe to First Quantum.
News of the sale emerged nearly a year after BHP announced it was closing the project and laying off up to 2,000 workers.
First Quantum, a Toronto-listed company founded in Perth, picked up the troubled mine-site for $376 million after BHP spent $2.3 billion to build it.
The sale price was at the bottom end of analysts' expectations, despite the presence of several companies showing an interest in the asset.
"It seems like a buyer of last resort," one investment adviser noted.
All eyes are now on First Quantum to see if it can make a buck out of its bargain buy, as the company has no experience in the low-grade form of nickel in Ravensthorpe.
While it will take time to tell how successful the nickel project is - BHP was troubled by the processing system - the deal is an immediate boon for Ravensthorpe business and home-owners reliant on demand from the local project.
One investment adviser remarked on the social significance of the transaction: "If that deal hadn't been done Western Australia would be paying the price for some time to come."
First Quantum executive director Martin Rowley said there would be a requirement for both fly-in, fly-out staff as well as live-in staff, and that the company would encourage families to move back to the Ravensthorpe area.
First Quantum expects to re-create about 600 jobs and the plant is slated to restart in late 2011, which is nearly three years after it closed.
Strategic deals

THE Nullagine joint venture between BC Iron and Fortescue Metals Group raised initial concerns as the former agreed to exchange half of the mine for use of the latter’s rail line, port-handling and ship-loading facilities.

But with the results of trial mining exceeding expectations, opinion is firming that BC Iron wasn’t necessarily hard done by.

“Getting rail access in exchange for equity? Some say they have sold the farm, but perhaps 50 per cent of something is better than 100 per cent of nothing,” one investment adviser told WA Business News.

The first commercial production is expected by the end of the year, offsetting the high price BC Iron paid for its promotion from mine owner to producer. The Pilbara mine is expected to produce iron ore at double the rate of its original plans after Fortescue fast-tracked the development of its Christmas Creek rail line.

There was no mention that iron ore junior Iron Ore Holdings was hard done by when it signed a deal with mining giant Rio Tinto.

Under the negotiated sales deal, Iron Ore Holdings will sell 1.5 million tonnes per annum of iron ore from its Phil’s Creek venture in the Pilbara. The company said that the commercial arrangements resulted in a net present value for the project of $40 million to $60 million.

The deal is a source of encouragement – or envy – to other junior miners in the region hoping to seal similar deals with mining heavyweights. Rio has benefitted by obtaining a source of ore to blend with its products from its Pilbara operations.

A separate agreement includes plans for an exclusive six-month negotiating period for Rio to investigate the junior’s Iron Valley deposit, which is located near the mining giant’s Yandicoogina mine.

Better known for his media interests, Kerry Stokes controls the iron ore junior through his Wroxby investment vehicle. Shares in Iron Ore Holdings have increased six-fold during the past 12 months.

Another mining giant, BHP Billiton, was involved in an important deal for the state during 2009, with the sale of its nickel project in Ravensthorpe to First Quantum.

News of the sale emerged nearly a year after BHP announced it was closing the project and laying off up to 2,000 workers.

First Quantum, a Toronto-listed company founded in Perth, picked up the troubled mine-site for $376 million after BHP spent $2.3 billion to build it.

The sale price was at the bottom end of analysts’ expectations, despite the presence of several companies showing an interest in the asset.

“It seems like a buyer of last resort,” one investment adviser noted.

All eyes are now on First Quantum to see if it can make a buck out of its bargain buy, as the company has no experience in the low-grade form of nickel in Ravensthorpe.

While it will take time to tell how successful the nickel project is – BHP was troubled by the processing system – the deal is an immediate boon for Ravensthorpe business and home-owners reliant on demand from the local project.

One investment adviser remarked on the social significance of the transaction: “If that deal hadn’t been done Western Australia would be paying the price for some time to come.”

First Quantum executive director Martin Rowley said there would be a requirement for both fly-in, fly-out staff as well as live-in staff, and that the company would encourage families to move back to the Ravensthorpe area.

First Quantum expects to re-create about 600 jobs and the plant is slated to restart in late 2011, which is nearly three years after it closed.

 

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