IronClad shares up on Chinese deal

West Perth-based IronClad Mining has entered into an agreement with a Chinese steel making company over the development of two of its iron ore projects in South Australia.

The company said it has signed a memorandum of understanding with Wuhan Iron and Steel Corporation of China (WISCO), currently the fifth largest steel maker in China.

Under the agreement, both companies will enter into a joint venture with WISCO fully funding the development of the Wilcherry Hill and Hercules iron ore projects through to completion of bankable feasibility study stage.

Following from that, a 50:50 JV will be formed with both companies each contributing equally to further development costs.

The projects are expected to produce up to 4 million tonnes of iron ore each year from 2011.

WISCO has also expressed an interest in obtaining a stake in the West Perth company, IronClad said.

News of the agreement boosted IronClad shares by 54 per cent to last trade at 20 cents at 12:20 AEDT.

The agreement is subject to due diligence by WISCO.

The announcement is pasted below:

IronClad Mining Limited (ASX: IFE) has signed a memorandum of understanding (MoU) with the Wuhan Iron and Steel Corporation of China (WISCO) which contemplates the co-operative development of IronClad's Wilcherry Hill and Hercules Iron Ore Projects on the Eyre Peninsula, South Australia.

The understanding envisages a Joint Venture between the parties whereby WISCO would fully fund and assist IronClad with the development of the project through to completion of the bankable feasibility (BFS) stage - designed to produce up to 4 million tonnes of iron ore per year commencing in 2011. It is currently envisaged that, at the completion of a successful BFS a 50: 50 joint Venture would result, with each party then contributing on an equal basis to further development costs.

Wuhan Iron and Steel, which is currently the 5th largest steel maker in China, has also stated in the memorandum that it is interested in acquiring a shareholding in IronClad Mining Ltd.

The Directors of IronClad consider that the signing of the memorandum with such a large and creditable steel maker is a very significant step in the development of the company's South Australian iron ore resources which were discovered only two years ago.

The joint understanding follows, by one month, a decision by the South Australian Government to award the Flinders Ports consortium the right to conduct a feasibility study for the construction of a common user bulk commodities port at Port Bonython for the export of iron ore from the Eyre Peninsula area.

Wilcherry Hill and the adjacent Hercules iron ore deposits are located just 110km to the west of Port Bonython.

IronClad understands that WISCO will now undertake their due diligence process in the Wilcherry Hill and Hercules prospects before year end and that a binding heads of agreement will then be entered into.