India Resources (ASX: IRL) has upped the deal ante, entering into an option to acquire a granted mining lease located within the Bonai syncline - a world class iron ore province located on the western edge of the Singhbhum Craton in Eastern India.
The Province is known to produce over 60 million tonnes of iron ore annually.
Under the terms of the deal, IRL will undertake legal and technical due diligence on the tenement over the coming months. Subject to the satisfactory due diligence, IRL will enter into various formal agreements to secure the mining and marketing rights from the vendor. The term of the option is for a period of six months.
The purchase consideration will comprise a total of A$9.5 million (INR 37.5 Crores), payable by the Company over a period of two years. The purchase instalments will be linked to various milestones as described below:
− 25% at the time of signing of the Acquisition Agreement
− 55% at the time of execution (finalisation of documentation) of the Mining Lease
− 20% upon the commencement of iron ore mining on the Mining Lease
The area is analogous to the Pilbara iron ore province of Western Australia, IRL said.
In the region, there are many sponge iron plants and blast furnaces in the district. Infrastructure is already in place with rail, roads and mining services in close proximity.
Regionally the prospect is located on highly prospective ground of the Bonai Iron Ore Group rocks. The prospect contains several types of iron ore, float, kanga and in-situ haematite iron ores. Rock chip samples were taken from the surface outcrop of the in-situ haematite, giving an average of 63.2% Fe and low values for contaminates.
There are numerous outcrops of in-situ haematite at surface and in small pits on the prospect, which are overlain in places by float and kanga ores and alluvium/laterite.
The outcrop area within the mining lease is approximately 500m x 450m and occurs on the top of a small hill. This has allowed an estimation of dip (approximately 30 degrees to the south east) and thickness (15m). Hence the project has considerable potential to provide a significant mining project with accessible mineralisation at or near surface.
Managing Director, Arvind Misra said today, the option agreement provides IRL with an opportunity to acquire a substantial project and for IRL to establish a foothold in the world class iron ore district of the Bonai region in India.
The purchase consideration for the project would be funded by a combination of equity and debt facilities.