Investors have welcomed Flinders Mines entering into a non-binding agreement with the Balla Balla Infrastructure Group, which could deliver the infrastructure and funding needed to help get its stranded Pilbara iron ore project (PIOP) into production.
Investors have welcomed Flinders Mines entering into a non-binding agreement with the Balla Balla Infrastructure Group, which could deliver the infrastructure and funding needed to help get its stranded Pilbara iron ore project (PIOP) into production.
Shares in Flinders were up 16.7 per cent at noon AEST to trade at 6.3 cents each following the announcement, which outlined a non-binding farm-in and joint venture agreement between the two companies.
Under the agreement, BBI Group will arrange all debt and equity financing for the development and secure long-term offtake agreements with customers up to the point of a final investment decision.
Flinders will retain control of the PIOP until the final investment decision.
At FID, Flinders has the option to elect to convert its stake to a revenue or royalty stream, or agree to forego a 60 per cent stake in the project to be free carried through construction to commissioning.
Additionally, the agreement includes a $5 million loan from Todd Corporation and a $6 million rights issue to provide working capital to Flinders.
Todd Corporation has a 56 per cent stake in Flinders and owns 90 per cent of the shares in the BBI Group.
The BBI Group is seeking to develop a namesake $6 billion iron ore port and rail project in the Pilbara that could link the PIOP to a port at Balla Balla.
A non-binding term sheet proposes a farm-in and joint venture arrangement between the two parties, which could see the cash-strapped Flinders free carried to a final investment decision on the project.
Today’s agreement includes a $5 million loan from Todd and a $6 million rights issue to provide working capital to Flinders while the new deal is formalised.
Flinders deputy chairwoman and chair of its infrastructure committee Cheryl Edwardes said the agreement marked a significant step forward for the PIOP.
Mrs Edwardes pointed to an independent review undertaking by PwC which stated that the most favourable option for the project was to pursue a deal with BBI Group.
“The next stage of the process will involve negotiating binding agreements and comprehensive engagement with all of our shareholders to explain the proposed agreements and seek feedback prior to seeking shareholder approval for the proposed transaction,” she said.
“We are determined to strive for independence and transparency in our dealings with BBI Group, which is a related party to our major shareholder Todd.”
Any binding agreement will be subject to the approval of by minority Flinders shareholders, with Todd being excluded from the process.
The company said it would also establish a shareholder hotline to ensure they were properly informed of the transactions.
Flinders’ minority shareholders and its board have been in a heated conflict since Todd Corporation launched a de-listing bid in December, which was eventually prevented by the Takeovers Panel.
In late June, around three weeks after a Business News article highlighted conflict of interest and disclosure of information concerns between Flinders Mines and BBI Group, Flinders announced board changes and a strategic review.
