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Prosperity is an iron ore trader serving customers in the People's Republic of China (the 'PRC') and holds investments in entities involved in the manufacture and sale of cement and clinker in the same market.
Prosperity also has a real estate division and has recently entered into a number of conditional agreements designed to build up a portfolio of PRC property and development assets.
Prosperity Minerals in Brazil JV to support iron ore expansion
Prosperity Minerals (LON:PMHL) shares advanced over 7 percent after it announced a new joint venture to acquire iron ore exploration and mining interests in Brazil.
Prosperity has expanded its iron ore trading business massively. It has more than doubled trading volumes, from 3.6 million tonnes in 2008 to just under 8 million tonnes in 2010.
It stressed that it must gain access to reliable supplies of iron ore, at a competitive prices, so it can sustain the expansion of its iron ore trading business.
So it has now decided to explore iron ore prospects in the State of Ceará, Brazil.
Investors were buoyed by the news with the stock rallying on London’s AIM market. Prosperity shares gaining 8 pence, or 7.3 percent, to 117.5 pence per share.
The parties are going to set up a new joint venture company, called UGL.
In association with the deal, Prosperity has loaned US$12 million to Globest.
Lead Hero will have a 50 percent stake in UGL, which will own the exploration rights. Effectively Prosperity will have a 35 percent stake in the Brazilian project.
The exploration rights cover 602.3 square kilometres, UGL will also have mining rights over 3.01 square kilometres.
The plan is for UGL to develop and operate iron ore mines on the property. It is agreed that once UGL has an operational mine, all the mine’s output will be distributed by Lead Hero.
Crucially the area already has producing assets. The mining concessions cover an area that has been mined since 2001.
Currently it has annual production of 3,000 tonnes of iron ore, and Prosperity believes that this area still has a remaining measured reserve of around 2.3 million tonnes with an average 60 percent iron content.
Subsequently, Prosperity expects UGL to get production up to 1 million tonnes per annum (tpa) run rate from mid-2011.
The exploration rights cover a much larger area. In total UGL is expected to receive 34 exploration rights from Globest.
Prosperity said that these 34 areas are in various early stages of exploration, and the amount of iron in the ground has yet to be confirmed.
“Whilst the majority of the Brazilian Mining Rights are at an early stage of exploration, they are located in the State of Ceará, an area where many smaller, good quality iron ore deposits have been found,” the company said.
“Ceará also has good infrastructure, including existing railway lines and port facilities,
“The directors therefore believe that the proposed transaction presents a good investment opportunity and could provide a valuable source of iron ore for the company's iron ore trading operations at a competitive price.”
