The development of Bushveld Minerals's (LON:BMN) iron ore deposit in South Africa has moved a step further - as the company agreed to co-operate with one of China's largest state infrastructure groups.
China Railway No. 10 Co (CREC 10), a subsidiary of China Railway, and Bushveld have entered a memorandum of understanding over joint metallurgy test work on Bushveld's P-Q iron deposit.
The programme will begin in January next year and is expected to run for several months.
The idea is it may lead to a potential investment or partnership for off-take contracts and/or joint infrastructure development, Bushveld said.
Chief executive Fortune Mojapelo told investors: "Positive results from this process, combined with the large scale and low-cost mining nature of Bushveld's P-Q deposit would position this project favourably in the global iron ore and steel industry and enhance the scope for the strategic partnerships we seek to support the accelerated development of this important project."
Nicolas Song, deputy general manager at CREC 10, added: "This is an important first step in what we hope is a long term relationship. We look forward to working with the Bushveld management."
China Railway has been part of the construction of more than two thirds of total operating railway in the People's Republic.
It has taken 230 overseas projects including railway, bridge, tunnel, and municipal work projects in more than 55 countries and regions globally.
In April this year a scoping study for Bushveld's P-Q zone showed a short timeline to production and cash flow, and a low need for capital expenditure.
Capex was put at US$126 million, while the net present value was US$140 mln at a 12.5% discount rate, while the real internal rate of return (IRR) was 34.2%.
The payback on the mine, which is based on producing a titanomagneitite concentrate product, was two years.
Bushveld shares moved around 4% higher after the news before easing back to 6.95p - an increase of 1.46%.