Fortescue Metals Group Ltd has confirmed it has started legal action iagainst a Cazaly Resources Ltd, marking an escalation in the dramatic events surrounding the Shovelanna iron ore tenement which has dragged in several major players.
Fortescue Metals Group has confirmed it has started legal action iagainst a Cazaly Resources, marking an escalation in the dramatic events surrounding the Shovelanna iron ore tenement which has dragged in several major players.
FMG said it had commenced legal action in the Federal Court against a Cazaly subsidiary, Cyril Resources Pty Ltd, and another party with whom it claims there was a prior agreement.
FMG claimed it had a pre-emptive right over any prospective iron ore tenement applications made by Cazaly managing director Nathan MacMahon and a company called Maincoast Pty Ltd, which FMG claims he was associated with. Cazaly previously stated there is no substance to FMG's allegations.
Earlier today, Cazaly Resources and BHP Billiton confirmed speculation that an agreement with BHP Billiton to sell to the resources giant any iron ore produced from their disputed Shovelanna project had been struck.
Rio Tinto has sought state government assistance to retrieve the tenement which Cazaly claimed after Rio Tinto and its partners let the lease lapse.
Shares in Cazaly (and its junior partner Echelon Resources Ltd) have rocketed in recent days. The project assumes 5 million tonnes production with BHP, Cazaly and Echelon sharing revenues of around $300 million pa, Cazaly said in an ASX announcement.
Below is a full copy of Cazaly's announcement:
RESOURCES MAJOR JOINS CAZALY AND ECHELON AT SHOVELANNA
Cazaly Resources Limited and Echelon Resources Limited are pleased to advise that they intend to enter into an exclusive Memorandum of Understanding (MOU) with BHP Billiton Iron Ore Pty Ltd (BHP Billiton) in relation to the purchase by BHP Billiton of ore produced from Cazaly's proposed Shovelanna Iron Ore Project situated upon the ground the subject of application E46/678.
Any MOU will be conditional upon a number of matters including the grant of E46/678, technical and legal due diligence, Ministerial Consents required under the Mining Act 1978 (WA), any other regulatory approvals and execution of definitive documentation.
Commenting on the intended transaction, Cazaly's Joint Managing Director Nathan McMahon said, "We are absolutely delighted to be negotiating with BHP Billiton. We have been approached by a number of parties over the past month but it is our view that the proposed ore purchase will facilitate the rapid commercialisation of the Shovelanna Iron Ore Project."
"Cazaly is also pleased with the proposed economic sharing of the product from E46/678. Based on the current Benchmark Price for Newman Lumps and Fines (FOB) and assuming production of 5 million tonnes per annum, BHP Billiton, Cazaly and Echelon would be sharing annual revenues of some $300 million."
Matthew Rimes, Managing Director of Echelon, commented "that the option of selling ore at the mine gate was investigated during the Scoping Study on the Shovelanna Iron Ore Project as a way of enhancing project value. This concept allows for the rapid commercialisation of the orebody and represents a good working model for utilising existing infrastructure.
A map is attached outlining the location of E46/678 in relation to BHP Billiton's Newman Operations.
THREAT OF LEGAL ACTION
Cazaly advises that Fortescue Metals Group Limited (FMG) has threatened Cazaly with legal action. FMG has alleged that Cazaly Iron Ore Pty Ltd holds E46/678 on constructive trust for FMG. The basis of this claim is not apparent.
Cazaly has considered its legal position and is confident that the FMG threats are without substance.
Cazaly will take all necessary steps to defend any proceedings that are instituted by FMG.
Cazaly's securities shall remain in a trading halt until the proposed MOU has been finalised.
