Perth-based mineral explorer Grange Resources Ltd's share price has risen over 7 per cent following the launch of an international tender process for joint venture partners for its US$1.2 billion (A$1.7 billion) iron ore pellet project.
Perth-based mineral explorer Grange Resources Ltd's share price has risen over 7 per cent following the launch of an international tender process for joint venture partners for its US$1.2 billion (A$1.7 billion) iron ore pellet project.
The project comprises the Southdown iron ore mine north of Albany and the Kemaman pellet plant in Malaysia.
At market close, shares in Grange had risen 13 cents to $1.39.
In February it was reported by WA Business News that China's second- largest iron ore trader, Sinosteel, was understood to be seeking a major stake in the project.
Below is the edited announcement:
The development of Grange Resources' (ASX: GRR) US$1.2 billion Australian-Malaysian iron ore pellet project has taken a major step forward with the launch today of an international tender process for joint venture partners for the project.
Grange is seeking one or more joint venture partners to contribute to the development of the project through direct cash funding and provision of services.
The tender process is being managed by Azure Capital and is expected to take approximately 6 months to complete. The tender process will be open to all qualified parties with no exclusive or preferred relationship currently in place.
Project construction is expected to commence in January 2007 (subject to statutory approvals) and first production is scheduled for early 2010.
The project is expected to produce 6.8 million tonnes per annum of iron ore pellets for supply to steelmakers using blast furnace or direct reduction production processes.
The mine will be located at Southdown, near Albany in Western Australia. Iron concentrate will be transported by slurry pipeline to Albany Port before being shipped to Kemaman in Malaysia where the pellet plant will be located.
Grange has adopted a dual location strategy for the project to maximise efficiency, take advantage of exceptional infrastructure at Kemaman and gain best possible proximity to Asian steel production centres.
Grange Managing Director Geoff Wedlock said pre-tender interest in the project was very high, with corporations in Asia-Pacific, Europe and North America, and the fast growing Middle East market, expressing a desire to become involved.
"This is a world-scale project with an outstanding opportunity to leverage its location in the Asia-Pacific region and the demand for iron ore pellets in burgeoning economies in the region," said Mr Wedlock.
"We have strong competitive advantages over traditional suppliers to this market, most of whom have their operations located outside this region.
"We believe this will be reflected in high interest in the Southdown/Kemaman project from major international groups."
Key Milestones
Key milestones in the Joint Venture Partner tender process are as follows:
Closing date for Expressions of Interest: 8 May 2006*
Due Diligence and Negotiation with Select Parties: mid-May to mid-August 2006*
Announcement of Preferred Parties: mid-August 2006*
* Dates are indicative and may change
Grange will keep the market updated on progress with the tender process in its Quarterly Reports.
Aside from financial and service contributions, Grange is also seeking Joint Venture Partners that can make non-financial contributions in the form of marketing, operational and strategic expertise.
Among those that have already given indications of interest are a number of Asian steel producers, existing iron ore producers, trading companies and financial investors.
Southdown/Kemaman Project Fundamentals
The project will operate for at least 22 years and is expected to supply pellets to key markets in the Asia-Pacific region at a very competitive delivered cost. The proximity of Kemaman to key Asian markets provides a significant freight advantage over alternative sources of supply such as Brazil.
Mr Wedlock said the outlook for the iron ore market, especially for iron ore pellets, was strong.
"In addition to the current unprecedented demand for iron ore in all forms - primarily required as feedstock to meet growing demand for steel in Asia - environmental factors are underpinning the rise of pellets in blast furnace steel production," he said.
Grange considers that the long term demand fundamentals for pellets are very positive and that this will underpin continued strong prices for the foreseeable future.
Open and Equal Tender Process
The intention behind the tender process is to provide a framework for the submission of offers by interested parties so that Grange can identify the most suitable parties and the best terms available.
Grange is committed to providing all qualified parties with the opportunity to participate in the tender process and participation will be on an equal basis.
There are currently no preferred or exclusive relationships in place.
Capital Management
Grange Chairman Anthony Bohnenn said the Company was very pleased to have received such strong interest in the project ahead of the formal tender process.
"The range of interested parties and varied ideas expressed about the optimum way forward for Grange is very encouraging," said Mr Bohnenn.
"The final joint venture structure could take many forms and we are excited about the range of possibilities for structuring the development of the project and delivering value for Grange shareholders through the project development process."
Tender Process Adviser
Grange has appointed Azure Capital as its corporate adviser and manager of the Joint Venture Tender Process.
Suitable parties are currently being invited to submit an Expression of Interest (EOI). From the EOI list, Grange and Azure Capital will shortlist the parties who offer the best terms and are considered the most suitable development partners. These parties will be given the opportunity to conduct detailed due diligence and submit a final, binding offer.
Expressions of interest are due 5pm Western Australian time on 8 May 2006.
More information concerning the Project and Joint Venture Tender Process is attached.
For further information visit the Grange website at www.grangeresources.com.au or for media enquiries contact John McGlue or Ann Nahajski at Porter Novelli on +61(8) 386 1233.
