07/05/2007 - 16:03

Midwest Corp to raise $66.9m for iron ore project development

07/05/2007 - 16:03

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West Perth-based Midwest Corporation Ltd has announced plans to raise $66.9 million through a placement to fund development of its iron ore projects.

Midwest Corp to raise $66.9m for iron ore project development

West Perth-based Midwest Corporation Ltd has announced plans to raise $66.9 million through a placement to fund development of its iron ore projects.

Midwest will initially place 20 million shares at $1.46 per share to raise $29.2 million, to be followed by a one for seven non-renounceable rights issue to all shareholders.

The issue, of around 25.8 million shares at $1.46 each, raising around $37.7 million, will be fully underwritten by Patersons.

 

 

The full text of a company announcement is pasted below

Use of Funds

The funds from both the share placement and the rights issue will be used on the following projects:

  • Weld Range and Koolanooka Magnetite Studies Project - the Scoping Study for the 50/50 studies project with Sinosteel Corporation for the Weld Range Haematite and Koolanooka Magnetite projects was recently approved by the Midwest board. This project is now progressing with a pre-feasibility study. The forecast expenditure for Midwest in relation to this joint venture over the next two years, which takes Midwest to the end of the project definitive feasibility study, has increased marginally to $18 million. Midwest's contribution to the Weld Range Haematite project study is expected to be $12.3 million. A decision will then be made by Midwest on whether to move the Weld Range Haematite project into an operational phase. Further drilling and feasibility studies will be required for the Koolanooka Magnetite project which have not yet been estimated and therefore not covered by the current capital raising.
  • Jack Hills Exploration and Studies Project - Midwest is planning to significantly increase the exploration activities at Jack Hills which is then expected to lead into a studies project to determine the viability of the Jack Hills project. An initial resource statement for Jack Hills is expected to be released during the second half of 2007 as a result of this exploration activity. Updates to the initial resource statement will be made as drill and assay results are incorporated into the geological models. The forecast expenditure on the Jack Hills exploration and studies project is $14 million and the forecast time period for this project is beyond a two year horizon.
  • Hampton Hill / Midwest Exploration and Studies Project - Midwest has a joint venture with Hampton Hill Mining NL, whereby Midwest undertakes a drilling programme and pre-feasibility study in relation to tenements owned by Hampton Hill Mining NL in the Weld Range area in return for a 60% ownership stake in all iron ore in these tenements. Midwest has already met the minimum drilling requirements under the joint venture. The latest forecast expenditure for Midwest in relation to this joint venture over the next two years is $11 million. A decision with then be made by Midwest on whether to move this project into an operational phase, possibly in conjunction with the Weld Range project.
  • Northern Infrastructure Studies Project - Midwest expects to be a founding developer and user of both the proposed new 600km railway from the Midwest Weld Range and Jack Hills projects to Oakajee and the proposed new port facility at Oakajee. Both of these infrastructure projects are critical to not only Midwest but also the State of Western Australia. The forecast expenditure for Midwest over the next two years is $16 million in relation to a studies programme for this infrastructure together with other important stakeholders in the Mid West region.
  • Koolanooka / Blue Hills Direct Shipping Operations ("DSO") Capital - the Minister for Planning and Infrastructure, the Hon Alannah MacTiernan, has requested that Midwest transfer its Koolanooka / Blue Hills DSO haulage operations from road to rail haulage by the end of September 2007. Midwest has been working towards a transition from road to rail for over 12 months which has included the purchase of 64 rail wagons from China at a cost of $6 million. Midwest also needs to purchase some land to facilitate the building of a rail siding and together with the actual construction cost of this rail siding are forecast to require funds of $6 million.
  • The company is also planning to increase this DSO project from the present 1 million tonnes per annum to 2 million tonnes per annum by 2009. This will require an additional 64 rail wagons at a similar cost of $6 million giving a total one-off capital requirement of $18 million.

    Summary of Projects for Which Funds Required

    • Weld Range and Koolanooka Magnetite Studies Project $18M
    • Jack Hills Exploration and Studies $14M
    • Hampton Hill Exploration and Studies $11M
    • Northern Infrastructure Studies $16M
    • Koolanooka / Blue Hills DSO Capital $18M

    TOTAL $77M
    FUNDING RAISED (Before cost of raising) $67M

    The remaining funding for these projects is expected to come from the cash profits derived from the Koolanooka / Blue Hills DSO project.

    The company's chief executive, Mr Bryan Oliver, said, "This capital raising is another positive step in the implementation of our strategy to become a world class exporter of iron ore in order to achieve sustainable corporate growth and maximise long term shareholder wealth."

    This announcement was the announcement referred to in the Company's request for a Trading Halt on Wednesday 2nd May 2007 and the Company now requests that the Trading Halt be lifted.

    STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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