Hannans Reward is selling the non-core Discovery Zone Prospect located in Kiruna, Sweden, to Avalon Minerals for AUD 4 million.

Sweden is the biggest producer of iron ore in the European Union.

The companies have executed a binding heads of agreement with the deal conditional upon completion of legal and technical due diligence by Avalon by November 23rd 2012.

Hannans has already indicated that the funds from the sale will be allocated to the Kiruna Iron Project which is located 1,200 kilometres north of Stockholm, with new diamond drilling and metallurgical testwork aimed at increasing the JORC Resource of 473 million tonnes at 40% iron.

It is anticipated that Kiruna will provide a premium quality iron ore concentrate, with ore to be transported by rail to ports in Sweden and Norway and then onwards to customers in Europe, the Middle East and Far East.

Funds will also be used on a Scoping Study for the Rakkurijoki JORC Resource which is the most advanced deposit within Kiruna. SRK Consulting independently values Kiruna Iron Project at US$140 million in accordance with 2005 Valmin code.

Exploration will also be ramped up at extensive portfolio of copper-gold projects in Sweden and Norway.

Key Transaction Characteristics

1. A cash deposit of USD 100,000 when the Condition Precedents are satisfied (First Payment);

2. A cash payment of USD 300,000 when a formal sale and purchase agreement is executed by Hannans and Avalon. This formal agreement is required to be signed within 30 days of the First Payment unless otherwise agreed by the parties and will be consistent with the terms set out in the HOA and will contain customary terms and conditions for a transaction of this nature;

3. A cash payment of USD 1,600,000 when written notification from the Mining Inspectorate of Sweden is received, noting that the Mining Inspectorate of Sweden formally approves the complete transfer or assignment of the Discovery Zone Prospect to Avalon on conditions (if any) acceptable to Avalon; and

4. A cash payment of USD 2,000,000 when Avalon receives full, unencumbered title to the Discovery Zone Prospect. Up to USD 1,000,000 of this final payment may, at Avalon’s sole and absolute discretion, be paid by Avalon issuing Hannans or its nominee up to USD 1,000,000 worth of Avalon shares.

Source - Proactive Investors

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