Hodges Resources Ltd said it has reached an agreement with Rio Tinto Mining and Exploration Limited (RTME), on the acquisition of their interest 60% in and rights to an iron sands project in North West New Zealand. The Agreement involves RTME selling their interest and rights in a Farm-In and Joint Venture for the project, a potentially large scale iron sands project in the North West of New Zealand.
The deal involves Hodges acquiring RTME’s interest in the project by payment of a non-refundable deposit of NZ$100,000 cash on execution of the agreement; payment of renewal invoices as they come due in coming months for both permits; payment of NZ$5,000,000 upon commencement of commercial production of iron ore product from the Project and a royalty payment on commercial production of US$1 per tonne for the first 10Mt and US$0.50 for the next 90Mt produced. No royalty after 100Mt of commercial production.
“We have identified two highly prospective projects and have also been able to negotiate terms that involve a low entry cost, with a deferred payment once the Project moves into production,” Hodges’ Managing Director Mark Major said. “This transaction could represent a company making deal for Hodges.”
Under the agreement, Hodges will be assigned all RTME’s rights, title and interest in the farm-in and joint venture agreement. Under the JV terms, Hodges will be the registered holder of a 60% interest in the permits and has the right to continue to earn a 60% beneficial interest by sole funding and delivering a pre-feasibility study to the JV partner. Hodges will then have a right to increase its beneficial holding to ultimately 80% in the projects by sole funding the completion of a feasibility study.
“At this point the partner will have the right to retain the 20% interest in the JV by electing to fund their position in the project or accept a 1% Net FOB sales revenue Royalty. The sale agreement is subject to license renewal and transfer of permits, including the consent by the overseas Investment Office of New Zealand,” the company said.
Hodges also said it has signed a binding Facility Agreement with BNM Australia Group Pty Ltd, a Western Australian mining and consultancy group for a total value of $3.0 million. Under the Facility Agreement, the Funder will provide access to funds up to a value of $3m, which can be drawn down at anytime. Interest will be paid at a rate of LIBOR plus 2% every six months. The term of the facility is three years from the date of the first drawdown.
In addition to the facility agreement, the Funder has also been offered a placement (“Placement”) for new shares in Hodges for 20,000,000 ordinary shares at an issue price of $0.03 per share, representing an 89% premium to the 30 day VWAP of Hodges. The Placement utilises 64% of Hodges’ remaining capacity provided for under ASX listing rules 7.1 and 7.1A and does not require shareholder approval. If the Funder subscribes for more than 8% of the Company’s capital, a Board position will be made available to them.
A finder’s fee will be payable on the asset acquisition from RTME. “The Directors believe the Project has the potential to become a world class iron sands operation capable of producing a highly marketable titanomagnetite product. The Project is closely situated to key end markets and is located in a first world jurisdiction where similar iron sands operations already exist or are under development” Major said.
The Project is located off the west coast of the North Island of New Zealand, in a premier iron sands jurisdiction. There are two established onshore iron sands mines currently in operation in New Zealand, Waikato North Head and Taharoa (refer to Figure 1), both owned by New Zealand Steel a subsidiary of ASX listed Bluescope Steel.
The Project consists of two separate tenements, the Mokau and Manukau Blocks, which cover more than 1200 km2, extending from the shore westwards to around 20 km offshore. The iron sands covering these tenements comprise of a solid solution of titanium, magnesium, manganese and vanadium in titanomagnetite.
The work completed by RTME since October 2007 and other mining companies, within the area, including aeromagnetic surveys, seismic, drilling and metallurgical testwork. Work programmes conducted to date indicate the titanomagnetite sands are unconsolidated which has the potential for a low capital, low operating cost iron sands operation.
RTME have been actively advancing the Project through exploration and stakeholder engagement programs. In addition to having completed exploration target resource evaluations, RTME have also undertaken environmental baseline and scoping studies, stakeholder studies and engagement meetings, conceptual operation studies and marine geophysical surveys.
Based on the evaluation of the preliminary exploration work on behalf of RTME and independently reviewed by Hodges’ consultant and Competent Person, Richard Twomey, an Exploration Target, of 2.5 to 3.0 Billion tonnes at 8.0 to 16.0% Fe, 1.3 to 2.3%TiO2 and 0.06 to 0.14%V2O5 has been identified at the Mokau Block. This estimate is based on broad spaced drilling and aeromagnetic survey information from a third party.