Centrex Metals and Chinese steel producer Wuhan Iron and Steel (WISCO) yesterday signed off on their South Australian iron ore joint venture.
The companies have now established a joint venture entity, Eyre Iron, to explore five of Centrex’s exploration licenses on South Australia’s Eyre Peninsula.
The joint venture aims to establish two magnetite iron ore operations each producing five million tonnes per annum within four to five years.
WISCO now controls a 60% stake in both the joint venture company and the five exploration tenements.
In order to complete the agreement, WISCO was required to pay a total of $102 million, $52 million of which went directly to Centrex, while the remainder was payed into the joint venture.
The Chinese company must also make further payments of $26 million to Centrex and $25 million to Eyre Iron next year to keep its 60% interest.
If the joint venture reaches inferred resource milestones of 1.25 billion tonnes, 1.5 billion tonnes, 1.75 billion tonnes and two billion tonnes of iron ore, WISCO will be further required to make four staged payments of $27 million for each.
If the projects move into construction, WISCO will also assist with arranging the financing.
According to Centrex chairman David Klingberg, the joint venture is a “company-making” deal and significant news for the South Australian economy.
“We are very pleased with the relationship that has developed with WISCO during the extensive negotiations and we look forward to a successful enterprise,” he said.
South Australian Minister for Mineral Resources Paul Holloway said the deal was an impressive milestone for the State’s resources sector.
“This investment is one of the largest by a Chinese-backed steel entity in the recent history of this State’s resources sector,” he said.
“It is testament to the fact that South Australia remains attractive to foreign investment in our mineral resources, particularly by the long-term customers of the future such as China.”
According to the Minister, both parties are also pursuing an additional joint venture to build a deepwater bulk mineral commodities export port near Tumby Bay.