The West Australian reported that shares in Cazaly Resources jumped on news of a conditional and staged sale of its Parker Range iron ore project in the Yilgarn region east of Perth as part of a deal worth up to AUD 180 million.
Cazaly said a heads of agreement had been signed with an undisclosed major South East Asian diversified investment group for the sale of Parker Range for AUD 100 million plus estimated royalties of more than AUD 80 million.
The agreement sets out a 45 day due diligence and exclusivity period and is subject to approval by the investment group's board.
Mr Nathan McMahon MD at Cazaly said that the sale of Parker Range was a tremendous achievement for Cazaly and would unlock value for the company's shareholders. He added that "This agreement unlocks and realizes the value we've created in the Parker Range project for Cazaly shareholders, while allowing Cazaly to retain a share of the exploration upside."
He said that "We are highly confident the Parker Range project will continue to grow in size and scale, and we are delighted to be partnering development of the project with a major international group."
The investment group will initially pay AUD 5 million to Cazaly as part of a convertible note issue and then pay AUD 40 million within six months of the sale and a further AUD 55 million on the earlier of iron ore being exported or 24 months from the signing of the sales agreement.
Once in production, Cazaly will secure a royalty of AUD 2.50 per tonne, capped at a maximum 10% of gross profit margin. The deal is conditional upon legally enforceable agreements for port access; FIRB, regulatory, mining and environmental approvals; mining contract agreements and project finance.
Cazaly is liable for an AUD 1.5 million break fee if it breaches various trigger events or does not complete the transaction. The parties will also enter a 50:50 regional exploration agreement, whereby Cazaly will manage all ongoing exploration.
The company said in a statement that "These arrangements provide for a well-funded party to aggressively pursue the development and construction of a mining operation at the Mount Caudan resource, whilst Cazaly focuses its exploration expertise on expanding the resources of the greater Parker Range project."
(Sourced from www.thewest.com.au)
