Iron ore exploration and development company Cape Lambert Iron Ore Ltd has signed a memorandum of understanding with Chinese company Xinxing Iron Pipes Co Ltd, relating to a potential equity sale.
Iron ore exploration and development company Cape Lambert Iron Ore Ltd has signed a memorandum of understanding with Chinese company Xinxing Iron Pipes Co Ltd, relating to a potential equity sale.
Under the MOU, Xinxing will purchase the higher stake of either 19.9 per cent of issued capital or up to 57 million shares in the company, in exchange for the "first right of refusal" to negotiate an off-take agreement at the Cape Lambert Iron Ore Project.
Xinxing has also signed a contract to take a minimum 500,000 to 1 million tonnes per annum of iron ore concentrate, to a maximum of 5 million tonnes.
The agreement is not binding, but a company spokesman said Cape Lambert was optimistic about the potential of the arrangement.
Xinxing was already in the business of smelting, and company personnell would visit the site in October with a view to finalising a formal Heads of Agreement.
However, MOUs signed with Shandong Yuansheng International Trading Co Ltd last year, and with Sinosteel Corporation in March remain on the table.
The full text of a Cape Lambert announcement is pasted below
MAJOR CHINESE GROUP SHOWS INTENT FOR SIGNIFICANT EQUITY STAKE AS PART OF OFF-TAKE AGREEMENT AT CAPE LAMBERT PROJECT
Iron ore exploration and development company Cape Lambert Iron Ore Ltd is pleased to confirm that Scezhwen stock exchange listed Chinese Group Xinxing Iron Pipes Co. Ltd has signed a Memorandum of Understanding confirming its intention to take a significant equity stake of up to 57 million shares or 19.9 per cent of the issued capital, whichever is the higher, in CFE.
The acquisition of equity was of a result of Xinxing wanting to have "first right of refusal" to negotiate an off-take agreement at CFE's 100 per cent owned Cape Lambert Iron Ore Project in North- Western Australia. This agreement, which is not binding, was finalised during negotiations in China in early October.
Xinxing Iron Pipes Company Limited is the largest steel pipe manufacturer in China and the world's second largest employing over 13,000 people and with an annual turnover in excess of US1.3 billion. Its main activities are smelting and processing steel and iron as well as manufacturing and selling cast iron pipes and steel grates.
Negotiations between CFE and Xinxing regarding the off-take agreement at the Cape Lambert Project are complete with Xinxing initially contracting to take 500,000 to 1 million tonnes per annum with an ability under the terms of the MOU to take a maximum of 5 million tonnes of iron ore concentrate.
Xinxing will send a delegation to visit the Company's office and conduct an on-site visit during October, with a view to finalising a formal Heads of Agreement.
CFE remains in negotatiaions with other major Chinese and Indian groups and will continue to review all off-take opportunties, with the view to selecting a partner that is not only committed to take the ore, but also the development of the Cape Lambert Project.
