Andrew Forrest’s Fortescue Metals Group will pay Iron Ore Holdings $25 million for the exclusive option to mine the Iron Valley and Weelli Wolli tenements in the central Pilbara, in a deal that could potentially be worth up to $650 million for IOH.
IOH announced today that it would retain ownership of the tenements if the option is exercised, while Fortescue would pay an additional $20 million in cash and a 2 to 5 per cent royalty.
Fortescue will hold the option to mine the tenements until March 31.
Based on pre-feasibility studies at Iron Valley and a production rate of 12-1Mtpa for up to 15 years, the royalties could be worth up to $600 million for IOH.
Under the agreement, Fortescue would pay all costs associated with developing and iperating a mine on the Iron Valley tenements.
Also, Fortescue also has the right to farm-in to a 50 per cent or more stake in the Maitland River iron ore deposit, should IOH go ahead with commercialisation of the asset.
Fortescue chief executive Nev Power said the company would commit to expedite the project to development, which is adjacent to its Nyidinghu deposit.
“Iron Valley’s location as a contiguous ore body to Nyidinghu would provide Fortescue with infrastructure layout and mining operations flexibility,” Mr Power said in a statement to the ASX.
