Radar Iron (ASX: RAD) is advancing the acquisition of a 51% interest in Mount Ruby DSO deposit in Far North Queensland with due diligence now underway.
Significantly, this project, which is being acquired from private company Developed Iron Ore, offers the potential for near term and substantial cash flow for Radar.
Mining of the high grade direct shipping magnetite ore is planned for the second half of 2013 with approvals in place or pending.
A drilling contractor has now been secured to begin drill testing in early March subject to pending environmental approvals.
Discussions are underway with a number of potential investment partners with a view to funding the acquisition and project development through offtake agreements.
Continuing discussions with Port authorities have confirmed capacity and the ability to provide the required shipping export solution
Mt Ruby lies within 120 kilometres trucking distance from the port near Innisfail.
Developed Iron Ore has already completed project evaluation and mining studies on the project and agreements are in place to enable transport including highway trucking and export through the port of Mourilyan.
Other approvals already in place or pending allow an initial mining rate of 600,000 tonnes per annum with mining slated to begin in the December quarter 2013.
A heads of agreement is in place for allocation at Port Mourilyan of two 45,000 tonne shipments per month with the potential for further allocations. Space at the port has also been granted for the stockpiling of iron ore.
Providing the exploration upside, a target has been defined for the high grade magnetite mineralisation at Mt Ruby of 8 to 27 million tonnes at 57% to 68% iron.
The mineralisation is open to the west and north and planned drilling in coming months will test for potential extensions.
Acquisition terms
Radar has until April 30, 2013 to complete due diligence, during which time it must drill 10 reverse circulation holes.
Upon successful due diligence Radar will pay $5 million to Developed Iron Ore and commit $3 million to the development of the project, after which it will acquire a 51% interest in the Mt Ruby Project.
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