Cazaly Resources has signed an agreement to sell its Parker Range iron ore project in the Yilgarn region to private explorer Gold Valley Iron for up to $13.35 million plus royalties.
Cazaly Resources has signed an agreement to sell its Parker Range iron ore project in the Yilgarn region to private company Gold Valley Iron for up to $13.35 million plus royalties.
Gold Valley Iron, which is part of West Perth-based Gold Valley Group, will pay $5 million upfront to Cazaly and a further $8 million upon commencement of production from the project.
The agreement also includes an initial three-month due diligence and exclusivity period following the payment of an exclusivity fee and a strategic investment in shares of Cazaly, which combined equate to $350,000.
In addition, a royalty ranging from 50 cents to $1, depending on the iron ore price, is payable to Cazaly on all ore produced from the project.
Shares in Cazaly slumped 16.1 per cent on the news of the sale agreement, to trade at 2.6 cents each at 11.15am AEST.
Cazaly joint managing director Nathan McMahon said the agreement realised some immediate value from the Parker Range project in an iron ore market that had recently shown signs of recovery.
“Following completion of the proposed transaction, the company will receive a significant cash injection and provide shareholders further upside by way of additional payments and a royalty from production,” he said.
“We are highly confident that the project will grow further and are confident Gold Valley has the requisite technical, managerial and importantly, marketing skills to develop the asset.”
In January, Cazaly appointed engineering consultants Avora to assess advancing its Parker Range project, which was dormant since Cazaly completed a definitive feasibility study on it in 2010.
In May, Mr McMahon told Business News the project had a capex of $170 million and all the requisite permits, both environmental and mining, with an iron ore grade of 61.9 per cent.
Gold Valley is currently developing the Yarram iron ore deposit in the Northern Territory and has the right to mine the Ridges iron ore deposit owned by Kimberley Metals Group in northern Western Australia.
The Yuzheng Xie-chaired Gold Valley also holds other mineral interests, including the recently acquired gold assets of Territory Resources.
Earlier this month, Venus Metals Corporation sold a 50 per cent stake in its Yalgoo iron ore project, located in the Murchison region, for $2.5million.