CuFe Ltd (ASX:CUF) has snapped up 100% of the iron ore rights over the JWD iron ore mine, having entered a deal with joint venture partner Golden Valley Group to acquire the remaining interest, subject to shareholder approval.
The transaction involves the issue of 150 million CuFe shares, and the refund of historical cash contributions.
CuFe will also access a further 900,000 metric tonnes of iron ore at the JWD resource, settled by a transfer of 5% of its joint venture interest in the Tennant Creek Copper Project to Gecko Mining Company Pty Ltd (GMC), who presently owns the remaining 40% interest in the project.
The company and Gold Valley Group have also agreed to restructure milestone payments under the Yarram Iron Joint Venture totalling $1.5 million.
Under the agreement the company will carry $500,000 of Gold Valley Groups contribution under Yarram Iron Joint Venture and the remaining $1 million payable in cash or shares at CuFe’s election will be deferred until the decision to mine is made under the Yarram Iron Joint Venture, rather than on announcement of a 3-million-tonne indicated resource grading in excess of 60% iron at the Yarram Iron Project.
Raising iron ore exposure in a heating market
“Given our positive outlook on the iron ore price for 2023 it makes sense for us to maximise our exposure to it via increasing our ownership in JWD,” CuFe executive director Mark Hancock said.
Iron ore price forecasts have been trending higher recently, with Macquarie’s commodity strategy team predicting an average of US$110 a tonne for this quarter.
The rest of the year is also looking positive, expected to average about US$114 a tonne throughout 2023, based mostly on a boost to sentiment, according to Macquarie.
“In addition to the JWD acquisition this holistic transaction with Gold Valley Group has the benefit of preserving cash by facilitating the settlement of an upcoming financial obligation via an asset swap for a small portion of our Tennant Creek Joint Venture interest and deferring our Yarram financial obligations,” Hancock continued.
“While the primary focus of this transaction is JWD we remain excited by the potential of both Yarram and Tennant Creek, with announcements expected in the near future on the mineral resources at both those projects.
“We thank the Gold Valley Group for their co-operation with this transaction and for their ongoing support of CuFe.”
CuFe will engage an independent expert to offer an opinion on whether the transaction is fair and reasonable to CuFe shareholders, to be included in the notice of meeting before a proposed General Meeting in April this year.
Highlights of the transaction
Assignment of GVG’s remaining interest in the JWD Iron Ore Rights
CuFe will take Gold Valley Iron Ore Pty Ltd’s (GVIO) 40% interest in the iron ore rights for the JWD Iron mine, to move to 100% ownership of iron ore rights.
In return, CuFe will issue 150 million CUF shares to GVIO and refund GVIO for historical joint venture cash contributions made under the JWD joint venture which currently total $1.32 million.
The issue of shares will increase GVG’s relevant interest in CuFe from about 19.84% to 35.38%. CuFe will therefore be required to seek shareholder approval to complete the transaction.
The $1.32 million payable to GVIO will be adjusted by cash paid by GVIO offset by amounts paid to GVIO under the JWD joint venture, after the effective date and prior to completion of the transaction.
Once the deal is done, the 60/40 joint venture between CuFe and GVIO with respect to the JWD iron ore rights will be terminated and CuFe will retain a 100% beneficial interest in the JWD iron ore rights.
Exercise of option to mine a further 900,000 tonnes of Iron Ore
The parties have agreed to settle CuFe’s obligation to pay the $2.25 million exercise price originally payable by CuFe to exercise its right to mine a further 900,000 tonnes of iron ore at the JWD Iron mine by transferring 5% of CuFe’s current 60% interest in the Tennant Creek Joint Venture to Gecko Mining Company Pty Ltd (GMC), who presently owns the remaining 40% interest in the Tennant Creek Joint Venture.
Upon completion of the assignment the Tennant Creek Joint Venture will continue operating with the parties’ respective new interests (55% CuFe and 45% GMC).
Read: Fe Limited moves to improve JWD deal and extend mining rights to June 2024
Variation of Milestone Payment under the Yarram Joint Venture
Following a subscription agreement which brought about the 50/50 Yarram joint venture, CuFe agreed to make a milestone payment to Gold Valley Brown Stone Pty Ltd (GVBS) of $500,000 in cash and $1 million in cash or shares at CuFe’s election, payable upon CuFe announcing an indicated JORC mineral resource estimate of 3 million tonnes grading in excess of 60% iron at the Yarram Iron Ore Project.
This milestone payment has been restructured by CuFe agreeing to carry the next $500,000 of GVBS’s joint venture costs under the Yarram Joint Venture.
In addition, the $1 million payable to GVBS in cash or shares at CuFe’s election is deferred until a decision to mine is made on the Yarram Iron Project.
The transaction is conditional upon CuFe obtaining shareholder approval and other necessary third-party approvals.