Legacy Iron Ore expounds on rationale for NMDC proposed investment

Legacy Iron Ore (ASX: LCY) said India’s National Mineral Development Corporation, (NMDC) which has proposed an equity investment in Legacy, was committed to using Legacy for further acquisitions in bulk commodities.

Several projects have already been reviewed by NMDC and Legacy, including an established JORC compliant coal project.

The strategy behind the proposed cornerstone 50% investment by NMDC in Legacy was outlined today.

NMDC also had the capacity to deliver large scale financing through lines of credit and off-take financing, provides Legacy with unrivalled long-term development security and access to additional opportunities.

NMDC Chairman Rana Som said recently, "With our expertise in iron ore mining and steel-making and their (Legacy's) exploration expertise, we will make a perfect synergy for both the companies. Simultaneously, it will provide us a ready-made foothold in Australia."

Chief executive of Legacy Sharon Heng said there were considerable benefits to shareholders.

“Legacy Iron Ore has taken a first mover advantage in securing a highly desirable cornerstone investor, who can contribute significantly to the company’s ability to grow value and develop ongoing assets and acquisitions, regardless of financial market conditions.”

The proposed equity participation by cornerstone investor NMDC "is a critical enabler and first step in executing on this strategy."

The investment by NMDC is an Australian first - providing Legacy with first mover advantage to drive shareholder value.

A parallel was drawn with Jupiter Mines (ASX:JMS) which neighbours Mt Bevan in the Yilgarn region.  Following a placement to Chinese investors, the Haoning Group of $3.7m and an off-take agreement to cover 40% of future direct shipping ore produced, te funds under the placement were used to accelerate the development of their iron ore projects.

Since this investment and strategic alliance, Jupiter Mines' market capitalization has increased from approximately $42m to $528m (undiluted) at present.

Specifically, the benefits for Legacy shareholders from the NMDC strategic plan were seen as:

- Unlocking hidden shareholder value, through the spin-off of core and non-core assets
- The acquisition of new projects. Potential projects are currently being assessed
- Project financing in general, but in particular, the potential to take the Mt Bevan Iron Project from exploration to production, once Legacy has secured its 60% Joint Venture interest from Hawthorn Resources Limited, after spending $3.5m. Significant work is underway to underpin this outcome, which will be the subject of a later release
- Ability to develop the necessary infrastructure in the Central Yilgarn area
- Development funding for a range of existing and potential projects
- Underwriting of future capital raisings to ensure funding is available to move projects forward, irrespective of global financial market cycles
- Practical experience in large scale iron ore resource development and production
- Mineral research and development capabilities
- Off-take access to proven and ready purchasers in Japan, South Korea and China

Mt Bevan is a joint venture between Legacy and Hawthorn Resources (ASX:HAW) whereby Legacy will earn a 60% interest in the project by expending a minimum of $3.5 million to develop the project to a pre-feasibility status.