23/07/2010 - 14:02

Korean giant takes stake in Sandfire

23/07/2010 - 14:02

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Korean copper smelting giant LS-Nikko Copper will take a 12.5 per cent stake in minerals explorer Sandfire Resources via a $93.9 million share placement.

Korean giant takes stake in Sandfire

Korean copper smelting giant LS-Nikko Copper will take a 12.5 per cent stake in minerals explorer Sandfire Resources via a $93.9 million share placement.

LS-Nikko will be Sandfire's third largest shareholder behind Korea's POSCO and Australian copper miner OZ Minerals.

LS-Nikko is the world's third largest copper smelter and will acquire the stake in Sandfire through the issue of 18.7 million shares at $5.02 per share.

The funds will be used to further explore Sandfire's DeGrussa Copper-Gold Project.

"We are delighted to have secured this landmark agreement with LS-Nikko, which represents an outstanding outcome for Sandfire shareholders," said Sandfire's managing director Karl Simich.

"This is the second strategic alliance we have secured with a major global downstream partner and is consistent with our business model of developing strategic relationships that enable us to maximise the value of our resource assets.

"The additional funds being injected by LS-Nikko will boost our cash reserves to over $145 million, putting Sandfire in a fantastic position to accelerate the exploration and development of DeGrussa and our other projects, which the Board believes will unlock substantial value for our shareholders," he said.

"We are delighted to announce this investment in Sandfire which represents our first entry into the Australian mining industry," said LS-Nikko's executive vice president, Seung-Jae Chyun.

"We believe that the DeGrussa Project is unique and offers very exciting growth potential. As a major end-user of copper, we see Sandfire as a natural strategic fit with L-S Nikko and we look forward to developing a long and mutually rewarding relationship that will create immense value for both parties," he said.

 

See full company statement below

 

Sandfire Resources NL (ASX: SFR; "Sandfire") is pleased to announce that it has concluded an agreement with Korean-based LS-Nikko Copper Inc. ("LS-Nikko"), the world's third largest copper smelter, encompassing a strategic alliance, sales arrangements for future production and a $93.9 million share placement.

Under the Agreement, LS-Nikko will acquire a 12.5% strategic holding in Sandfire through the issue of 18.7 million shares at $5.02 per share, representing a premium of 10% to the 5-day VWAP of Sandfire shares.

The funds will be used to underpin an unprecedented exploration program at the DeGrussa Copper-Gold Project in Western Australia, giving shareholders an outstanding opportunity to capitalise on the upside of this emerging world-class region, which already hosts four high-grade copper-gold deposits.

Following the recent 43% increase in the JORC resource estimate for DeGrussa, which now stands at 533,000 tonnes of contained copper and 559,000oz of gold, the Company now has a resource target2 of 1 million tonnes of contained copper metal.

The significant cash injection will also provide cornerstone funding for development of the DeGrussa Project, while the relationship with LS-Nikko - together with Sandfire's existing strategic alliance with POSCO - will underpin the potential for Sandfire to secure project finance on highly favourable terms.

The Agreement concludes a two-month process which also encompasses sales arrangements covering 45% of Sandfire's future base metal production at fair market prices.

LS-Nikko is the world's third largest copper smelter with annual capacity of 560,000 tonnes of metal, of which more than 450,000 tonnes is used in its fully integrated downstream business. With revenues of US$4.9 billion in 2009, LS-Nikko is Asia's third largest buyer of metals.

LS-Nikko is 50.1% owned by the giant Korean industrial conglomerate, LS Corp, and 49.9% owned by a Japanese consortium including JX Nippon Mining & Metals Corporation, which owns the fourth largest copper smelter in the world, Marubeni Corporation and Mitsui Mining and Smelting Co. Ltd.

Commenting on the transaction, Sandfire's Managing Director, Mr Karl Simich, said:

"We are delighted to have secured this landmark agreement with LS-Nikko, which represents an outstanding outcome for Sandfire shareholders. This is the second strategic alliance we have secured with a major global downstream partner and is consistent with our business model of developing strategic relationships that enable us to maximise the value of our resource assets.

"The Strategic Alliance with LS-Nikko complements the existing relationship which we put in place with POSCO two years ago. That partnership has been very productive for Sandfire, giving us the strategic backing and access to funding which enabled us to discover the world-class DeGrussa Project last year.

"The additional funds being injected by LS-Nikko will boost our cash reserves to over $145 million, putting Sandfire in a fantastic position to accelerate the exploration and development of DeGrussa and our other projects, which the Board believes will unlock substantial value for our shareholders."

LS-Nikko's Executive Vice President, Mr Seung-Jae Chyun, said:
"We are delighted to announce this investment in Sandfire which represents our first entry into the Australian mining industry. We believe that the DeGrussa Project is unique and offers very exciting growth potential. As a major end-user of copper, we see Sandfire as a natural strategic fit with LSNikko and we look forward to developing a long and mutually rewarding relationship that will create immense value for both parties."

Transaction Details
The share placement to LS-Nikko, which will comprise up to 18.7 million shares at $5.02 per share, can be undertaken within the Company's available 15% share placement capacity. The agreement is subject to approval by each respective company's Board and Foreign Investment Review Board (FIRB) approval, if required.
LS-Nikko has the right, following completion of the placement, to nominate a representative to be considered for appointment to the Board of Sandfire and the

Agreement also encompasses the opportunity to share technical skills and knowledge.
Under the Agreement, following completion of the placement, LS-Nikko has the right, for as long as it maintains a minimum 10% shareholding:
to maintain its interest in the Company by participating in future capital raisings. The shares to be issued to LS-Nikko are subject to a 1-year lock-up. Sandfire has a pre-emptive right to buy back the shares issued to LS-Nikko; and
LS-Nikko will be offered the right to purchase 45% of Sandfire's share of any copper concentrate and other base metals produced from any of its projects, at fair market prices.

 

 

 

 

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