State wants to terminate Midwest Corp agreement

Iron ore miner Midwest Corporation Ltd's plans to expand its operations have suffered a major setback after the state government said it wanted to terminate a state agreement that is central to the company's growth strategy.

As detailed by WA Business News in June, the state government believes Midswest's state agreement is outdated and no longer appropriate.

Midwest informed the ASX today that it has received a letter from State Development Minister Eric Ripper expressing a desire to terminate the Iron Ore (Murchison) Authorisation Agreement 1973.

Midwest claimed in May, when it signed a deal with infrastructure company Yilgarn Infrastructure Ltd, that the state agreement authorised the construction of a new port north of Geraldton and a railway from the coast to the Weld Range and Jack Hills projects.

However Mr Ripper wants to terminate the agreement, which was originally struck with Northern Mining in 1973 and then passed on to Kingstream Steel and Midwest.

"I am advised that the agreement is very dated and is unworkable in its current form," Mr Ripper wrote, in a letter to Midwest stamped July 12.

"The changes to the agreement which would be required to make it usable are so extensive that it would need to be almost totally rewritten.

"My strong preference is for the agreement to be terminated on the basis of Midwest Corporation being granted tenure under the Mining Act 1978 over the remaining portions of TR3902H (Weld Range)," the letter said.

While Midwest disagreed with the Minister's assessment, the company said it would be pleased to consult with the Minister in relation to what it termed "mutually acceptable improvements."

"Midwest has been giving effect to the Midwest State Agreement, as has the Government," the company said.

"Midwest is currently undertaking an extensive exploration programme in accordance with an approval given under the (Iron Ore [Murchison] Authorisation Agreement 1973) by the relevant Minister, and Midwest has already undertaken extensive work regarding the port and rail developments."

"Midwest believes the Midwest State Agreement is workable and substantially meets the Governments stated policy objectives."

In other Midwest Corporation news, the company announced it would undertake a pro rata share offer to shareholders, issuing one share for every seven held with an issue price of $1.46.

The non-renounceable issue is underwritten by Patersons Securities Ltd.

The full text of a company announcement is pasted below

Iron Ore (Murchison) Authorisation Agreement 1973 ("Midwest State Agreement")

Midwest Corporation Limited ("Midwest") received a letter today from the Western Australian Minister for State Development (being the Minister responsible for the Midwest State Agreement).

Enclosed is a copy of the letter from the Minister.

The Minister has expressed a preference for the Midwest State Agreement to be terminated on the basis of Midwest being granted tenure under the Mining Act 1978 over the remaining portions of TR 3902H (Weld Range). The rail and port infrastructure would then be developed outside of the terms of the Midwest State Agreement.

However, Midwest believes the Midwest State Agreement is valid, of full force and effect and workable in its current form, but would be pleased to consult with the Minister in relation to mutually acceptable improvements.

Midwest will continue to implement all of its obligations under the Midwest State Agreement including those relating to the rail and port infrastructure.

By their very nature state agreements are enabling agreements. They assume that the parties will act in good faith to give effect to what is contemplated and proposed by the agreement.

Midwest has been giving effect to the Midwest State Agreement, as has the Government.

Midwest is currently undertaking an extensive exploration programme in accordance with an approval given under the Midwest State Agreement by the relevant Minister, and Midwest has already undertaken extensive work regarding the port and rail developments.

Midwest expects the State to continue to act in good faith in giving effect to what was intended by the Midwest State Agreement. Midwest believes the Midwest State Agreement is workable and substantially meets the Governments stated policy objectives.

Midwest has requested a meeting with the Minister for discussions regarding the areas where the Government believes the Midwest State Agreement might be improved.

Midwest would have preferred to have met with the Minister before the release of this announcement but continuous disclosure obligations prevented it from doing so.