Ferrex plc, the AIM quoted iron ore and manganese development company, has announced a major deal with Anglo American and its subsidiary Kumba Iron Ore, to develop its Mebaga iron ore project in Gabon, West Africa, for up to two years.
The three parties have signed a binding term sheet for exploration funding which also includes provision to refund Ferrex the US$1 million it has spent to date on exploration costs and in return Anglo American and Kumba, who will operate as a 50:50 joint venture, will receive the option to acquire 100 percent of the project.
In summary, the Term Sheet outlines a transaction whereby Anglo American and Kumba fund the exploration of Mebaga and surrounding areas over a period of up to two years and includes a provision to refund Ferrex for the majority of the exploration spend to date.
The term sheet also allows Anglo American and Kumba to move to 100 percent ownership of the Project at its election via a purchase arrangement or alternatively for Ferrex to maintain 100 percent ownership of Mebaga if Anglo American and Kumba do not elect to purchase the project.
Exploration will be managed by Anglo American and Kumba; however will utilise the existing in-country exploration team of Ferrex.
The Agreement is subject to final due diligence, completion of a detailed legal agreement, the approval of all parties’ boards and the approval of the Gabonese government.
Further details on the investment by Anglo American and Kumba will be provided when these requirements have been successfully met, and the market will be informed of these developments in due course.
Ferrex’s Managing Director Dave Reeves said: “This represents a significant milestone for Ferrex. To have secured the interest of a major mining house such as Anglo American and the operational experience of Kumba Iron Ore, reinforces our confidence in Mebaga as a leading DSO iron ore project in West Africa, and of Gabon as a desirable mining investment destination.
“We believe Mebaga has significant value uplift potential, highlighted by the Exploration Target of 90 to 150Mt @ 35 to 65 percent Fe and 550Mt to 900Mt @ 25 percent to 40 percent Fe defined over an 8km strike length of a total 19km strike identified at the Project.
“With Anglo American managing the project utilising our highly-experienced in-country team, Mebaga will benefit from leading technical expertise while maximising the exploration work undertaken, providing Ferrex with access to substantial value accretion whilst minimising exposure to exploration expenditure.
“ Due diligence is targeted for completion in February 2014 and at this point the full commercial terms of the agreement will be announced to the market."