Rio Tinto Ltd could acquire up to 19.9 per cent of Perth-based iron ore hopeful Grange Resources Ltd, making it Grange's largest security-holder, after agreeing to sell iron ore tenements adjoining the Southdown magnetite deposit.
Rio Tinto Ltd could acquire up to 19.9 per cent of Perth-based iron ore hopeful Grange Resources Ltd, making it Grange's largest security-holder, after agreeing to sell iron ore tenements adjoining the Southdown magnetite deposit.
Under the agreement, which will see Grange acquire the eastern 6km extension of the Southdown magnetite deposit, Grange will pay $1 million and issue 9 million shares to Rio, along with 9 million unlisted options exerciseable at $1.50 expiring three years after the date of issue, and 8.5 million unlisted options at $1.95 each, expiring one year after date of issue.
The transaction is subject to shareholder approval.
Grange said in an announcement the purchase would enable the company to combine the entire deposit into a single project, extending the proposed operation's life with minimal additional capital expenditure.
The acquisition will be held by Grange exclusively, and will not form part of its existing joint venture with Japanese trading house Sojitz Corporation, which took a 30 per cent stake in the Southdown project earlier this year.
The full text of a company announcement is pasted below
Grange Resources Limited (ASX:GRR) is pleased to announce that it has signed an agreement with Rio Tinto Exploration Pty Ltd to acquire a 100% interest in Rio Tinto's Exploration Licence E70/2512 containing the eastern 6km extension of the Southdown magnetite deposit.
The purchase of the exploration licence will substantially increase the total Southdown magnetite resource available for development.
The consideration for the acquisition is:
- A cash sum of A$1 million; plus
- 9 million ordinary fully paid shares in Grange; plus
- 9 million unlisted Grange options exercisable at A$1.50 and expiring three years after the date of issue; plus
- 8.5 million unlisted Grange options exercisable at A$1.95 per share and expiring one year after the date of issue.
The shares and three year options are subject to a voluntary 12 month escrow period and the one year options are subject to a voluntary 10 month escrow period.
The exercise of the options by Rio Tinto would realise approximately A$30 million in exercise proceeds and would take Rio Tinto's interest in Grange to 19.9% on a fully diluted basis on completion of this transaction.
Aeromagnetic surveys and exploration drilling by Rio Tinto on E70/2512 support Grange's view that the Southdown deposit extends for a total of approximately 12kms.
The purchase of E70/2512 will enable the entire deposit to be combined into a single project significantly extending the project life with minimal additional capital expenditure.
Commenting on the Agreement, Grange's Managing Director Mr Geoff Wedlock said the agreement with Rio Tinto is an excellent outcome for Grange and its partners.
"Grange has been interested in acquiring Rio Tinto's tenements for some time and we are delighted to have reached an agreement at a stage which allows Grange to factor the expanded resource into its development plans for the Project".
The issue of shares and options to Rio Tinto will be subject to shareholder approval at a shareholders' meeting to be held in late September 2007. The directors of Grange have resolved that they will recommend the transaction to shareholders, and in respect of their own shareholdings, intend to vote in favour of the resolutions that will be proposed in the notice of meeting to approve the transaction.
Mr Sam Walsh, Chief Executive, Rio Tinto Iron Ore said ".Rio Tinto is pleased to have reached agreement with Grange. Combining our two assets makes sound commercial sense and Rio Tinto is pleased to continue its interest in the resource through a substantial equity position in Grange."
E70/2512 will be owned by Grange exclusively and will not form part of the existing joint venture with Sojitz Corporation.
The agreement is subject to the relevant approvals under the Mining Act and approval by the Foreign Investment Review Board.
Exploration History of E70/2512
Rio Tinto Exploration undertook exploration drilling during the period October 2005 to February 2006 to investigate the eastern extension of the Southdown Magnetite Deposit.
Rio Tinto completed 23 diamond drill holes spaced approximately 100 metres apart on 9 wide spaced traverses between 200 and 800 metres apart over approximately 5kms of strike length of the deposit within E70/2512.
Although the drilling density is inadequate to allow classification of the resource under the JORC code it provides some indication of the potential magnetite resource present within E70/2512.
Exploration completed to date indicates the continuation of the Southdown deposit and this presents potential to substantially increase the resources previously identified by Grange.
Grange was advised by Azure Capital and Clayton Utz on the transaction.
