Cazaly Resources Ltd has made a stunning return to trading, leaping to $2.40 a share after a four-day halt was lifted before settling back to $1.76.
Cazaly Resources Ltd has made a stunning return to trading, leaping to $2.40 a share after a four-day halt was lifted before settling back to $1.76.
That remains a significant premium to its $1.50 close on November 22 and gives it a market capitalisation of around $75 million.
The company has been the centre of intense interest regarding the disputed Shovelanna tenement which it claims in partnership with Echelon Resources Ltd, which has also leapt after returning to trades, gaining almost 100 per cent on opening before settling back to close at 85 cents a shares - or around 50 per cent up on the previous close.
In keeping with the Cazaly/Echelon view that they will have control of the resource once state development minister Alan Carpenter decides on appeals by former holder Rio Tinto and its partners, Cazaly announced today that it and Echelon have signed a memorandum of understanding with BHP Billiton Ltd to take 5 million tonnes of ore per year.
Andrew Forrest's Fortescue Metals Group Ltd has disputed Cazaly's deal with BHP, claiming it had a pre-emptive right over the Shovelanna ground.
Below is today's announcement:
CAZALY REACHES AGREEMENT ON SHOVELANNA MOU
Cazaly Resources Limited (ASX:CAZ) (Cazaly) and Echelon Resources Limited (ASX:ECH) (Echelon) have signed a Memorandum of Understanding (MOU) with BHP Billiton Iron Ore Pty Ltd (BHP Billiton) in relation to the long term sale of iron ore from the Shovelanna Iron Ore Project (Shovelanna) contained within application E46/678.
The terms of the MOU provide that in the event Cazaly is granted E46/678:
Cazaly will deliver to BHP Billiton approximately five million wet tonnes per annum of primary crushed ore, subject to Cazaly delineating a JORC compliant Proven and Probable Reserve of at least 100 million tonnes and such Reserve being compatible with specifications to be agreed.
First production is planned within two to three years of receipt of all necessary consents and approvals for the commencement of exploration at Shovelanna.
Within six months of determining the size and quality of a Reserve, BHP Billiton must elect whether to purchase any additional ore in excess of 100 million tonnes on terms and conditions to be agreed. Cazaly may sell additional ore not purchased by BHP Billiton to third parties.
BHP Billiton will pay Cazaly a predetermined price based on the Benchmark Price for Mt. Newman Lump and Fines (FOB).
Cazaly has calculated that its margin based on current prices will be in the range of $70 million to $85 million per annum. These calculations are based on production of five million tonnes per annum and standard industry contract mining and primary crushing costs.
Under the MOU the parties are to negotiate a detailed binding formal agreement within the next 4 months or such other period as agreed. Cazaly and Echelon have agreed to exclusively negotiate with BHP Billiton during this period.
Cazaly will be responsible for the exploration, mining and primary crushing of ore from E46/678 together with delivery of the ore to an agreed delivery point on or near the boundary between E46/678 and BHP Billiton's adjoining Ore Body 18.
BHP Billiton and Cazaly will work together in good faith to assess whether Ore Body 18 North and Shovelanna should be developed as a single unified mining operation.
BHP Billiton will have the benefit of change of control provisions.
Cazaly will transfer to Echelon a 14% interest in E46/678 upon Echelon complying with its obligations under the agreement between Cazaly and Echelon.
The MOU is non binding and conditional upon E46/678 being unencumbered and being granted on terms and conditions acceptable to BHP Billiton, any challenge to that grant being dismissed or discontinued, BHP Billiton completing satisfactory legal and technical due diligence, receipt of associated State and Federal consents and approvals including
