Salmon River Resources Ltd announced that it has signed a non binding MoU with General Steel Holdings Inc a company listed on the New York Stock Exchange, for itself and on behalf of certain subsidiaries and affiliates regarding rights to purchase part of any future iron ore production from properties currently under option to and/or to be acquired by Salmon River and to provide assistance to Salmon River in raising up to CAD 110 million in private placement financings as well as committing to fund future capital expenditures and other development costs.
The MOU is intended to lay the groundwork for Salmon River to fund the exercise of its exclusive option to acquire 100% of Treppo Grande Iron Pty Ltd and to fund future development costs of the Treppo Grande iron ore project.
Under the MOU terms, the GS Group has also committed to fund future capital requirements as well as provide project management and co-ordination services to the Company in return for compensation equal to up to a 51% profit interest in the Treppo Grande Project, on terms to be mutually agreed in the final definitive agreements.
Salmon River has previously reported on its exploration program on the Treppo Grande properties, comprising 100% ownership of five tenements in the highly prospective Yilgarn Craton in South Western Australia.
In return for providing financing and management assistance outlined herein, the GS Group will be granted a right to acquire
1. Up to 2 million tonnes per annum of Hematite ore production from the properties acquired by Salmon River under the Treppo Grande Option or other properties acquired by Salmon River in the future, at 95% of prevailing market prices once production has commenced
2. Marketing rights to 40% of the Hematite ore production above 2 million tonnes per annum generated from such properties. It should be noted that the Treppo Grande Project is not currently in production nor has a mineral resource been estimated for the Project. There is no assurance that a commercially viable mineral resource will be found or that the Treppo Grande Project will attain commercial production.
The Parties propose to negotiate and complete a binding investment framework agreement by 30th November 2011.
Mr Doug Betts Salmon River Chair said "The signing of the MOU with GS Group is a significant step in the development of Salmon River and the Treppo Grande iron ore project. With these arrangements with the GS Group, Salmon River is developing significant mutual beneficial relationships with major Chinese stakeholders, which provides for the Company current and future funding requirements and also delivers security of supply to our new Chinese partners from the highly prospective Australian Yilgarn Craton iron ore formations. We intend to move quickly to exercise the Treppo Grande Option and to develop this significant asset and its potential value with our Chinese partners."
Mr Yu Zuo Sheng Chairman and CEO of General Steel noted that "We are delighted to become involved with Salmon River and in its exciting Treppo Grande Project. This arrangement, we believe, has potential to generate significant benefits to our mutual public shareholders. This partnership with Salmon River is in-line with General Steel's on-going efforts to expand profit margins by securing a steady supply of raw materials at competitive price. General Steel's long-term strategy seeks to establish close relationships with overseas iron ore miners that will grant us high quality iron ore resources and place us in an advantageous position as we strive to meet the robust demand for steel production in China's western regions."
