Mineral Resources to revive Windimurra

A consortium led by aggressive Perth-based mining services group Mineral Resources will revive the stalled Windimurra Vanadium project near Mt Magnet, after striking a deal with administrators and receivers.

The consortium will take a majority shareholding in the Windimurra project by recapitalising the still incomplete mine, 600km north east of Perth.

The proposal has the support of Windimurra's secured lenders, who were owed $US125 million when the miner collapsed in February after it was unable to raise an extra $80 million needed to complete reconstruction of the operation. The lenders will take a minor equity position in the company.

Under the recapitalisation plan agreed with Brian McMaster and Martin Madden, the receiver and managers of the asset, the consortium will provide the necessary debt funding to complete development and resume production.

Mineral Resources will also contruct and operate the project's crushing and processing plants in line with its original contract with Windimurra Vanadium.

The original 10 year build-own-operate contract was previously valued by Windimurra Vanadium at $300 million.

Mineral Resources, which is also currently seeking to wrap up a $143 million friendly bid for aspiring iron ore miner Polaris Metals, said it hoped to complete the Windimurra deal in February and resume production at the mine in the third quarter of next year.

Executive chairman Peter Wade said: "this is a world class vanadium project that can produce significant shareholder value as the world economy improves."

Windimurra is one of the largest and highest grade vanadium deposits in the world but has proven a graveyard for virtually everybody involved with it over the last decade.

Originally developed by Roderick Smith's Precious Metals Australia with the backing of Swiss metals trader Glencore in 1999, it was dogged by technical problems, falling vanadium prices and weak cashflows from the outset, meaning PMA's interest was progressively whittled down to a 10 per cent royalty stream.

In 2003, Glencore offshoot Xstrata shut the operation down citing weak vanadium prices and sent demolition crews in the following year, despite PMA's claims the operation could be operated profitably.

The matter ended up in the courts and was also the subject of a West Australian parliamentary enquiry. The parliamentary committee was scathing of Xstrata's actions and was a major factor in the Swiss group's subsequent decision to walk away from the project and settle with PMA for $21 million in 2005.

PMA then began redeveloping the operation, but again became embroiled in controversy when it was revealed in 2007 that the committee's confidential draft report had been leaked to outcast lobbyist Julian Grill, who was advising PMA.

Despite the controversy, PMA continued on with its redevelopment plans and changed its name to Windimurra Vanadium in late 2007.

By mid 2008 it had invested over $200 million in the redevelopment but was forced into administration in February when the global financial crisis stymied efforts to raise an extra $81 million needed to complete construction.