Gindalbie Metals has agreed to sell its Shine hematite iron prospect to Mount Gibson Iron for $15 million as it focuses attention on bringing its Karara magnetite project to full production.
Gindalbie Metals has agreed to sell its Shine hematite iron prospect to Mount Gibson Iron for $15 million as it focuses on bringing its Karara magnetite project to full production.
Mount Gibson will pay Gindalbie $12 million in cash on settlement, with a further payment of $3 million due on the first commercial sale of iron ore from the project under a binding term sheet between the two companies.
Gindalbie has undertaken substantial exploration work at the project, with a feasibility study completed and approvals well advanced.
The company previously reported an indicated hematite mineral resource at the Shine project of 6.1 million tonnes at an average grade of 59.8 per cent.
The project is located about 85 kilometres north-west of Mount Gibson's operating Extension Hill iron ore mine and about 200km by road from its rail infrastructure in Mullewa.
The agreement between the two companies also allows for Mount Gibson to negotiate use of Karara Mining's rail infrastructure.
"Building our hematite iron resources in the Mid West is a key priority for Mount Gibson and this represents a low-cost near-term development opportunity that fits perfectly with our strategy," Mount Gibson chief executive Jim Beyer said.
"Given the advanced nature of the Shine project, its proximity to our existing operations and availability of existing infrastructure capacity as production from Tallering Peak winds down in the coming year, we will be looking to advance development as quickly as possible."
Mount Gibson will also pay royalties to Gindalbie for ore mined and sold from the project, but only when the Platts 62 per cent index price is higher than $115 per dry metric tonne; for every dollar that the index trades above this level, Mount Gibson will pay a royalty of 20 cents per tonne.
The transaction is conditional upon approval from the Foreign Investment Review Board.
Gindalbie managing director Dale Harris said the sale would further strengthen the company's balance sheet and represented a good deal for shareholders.
"The board has concluded that the outright sale negotiated with Mount Gibson represents the best outcome for our shareholders," he said.
"Not only does it avoid any development and funding risk, but it realises an immediate upfront cash return which will further strengthen our balance sheet."
Gindalbie flagged last month that it was facing further delays at its flagship Karara magnetite project, predicting magnetite concentrate output would reach 75 per cent of nameplate capacity by the end of March next year.
It had previously forecast the project would be operating at its full 8mt per annum capacity by July this year but has been forced on several occasions to request further working capital from its joint venture partner, Ansteel, to help it address production delays.
