The Foreign Investment Review Board (FIRB) has approved a $271 million investment by Chinese state-owned steel producer Wuhan Iron and Steel (WISCO) into South Australian iron ore developer Centrex Metals.
The unconditional green light clears the way for WISCO to take a 60% stake in the iron ore rights of five Centrex-owned tenements on the Eyre Peninsula.
China’s National Development Reform Commission has also approved the investment.
WISCO will take a direct equity stake of 15% as well as a place on the Centrex board by acquiring 40 million shares at 25 cents per share for $10 million.
The company will inject staged payments totalling $186 million directly into Centrex as progressive resource milestones of up to two billion tonnes are achieved.
WISCO will also deliver $75 million into the Eyre Iron, the official joint venture between the two companies that will undertake the initial exploration and study programs.
According to a statement, the companies are also planning to form another joint venture to build a Cape-size deep water export port at Sheep Hill, north of Tumby Bay.
Centrex chairman David Lindh this morning said the agreement will allow Centrex to enter 2010 with a well funded iron ore growth strategy.
“Under existing contracts and commitments, this is already a minerals export business that will be worth around $500 million in the next few years,” he said.
“All of the cornerstones are now in place to rapidly escalate our growth into a billion dollar business with further and considerable multi-project development opportunities.
“This will position Centrex as a major player in Australia’s iron ore industry.
“We are delighted to have WISCO as our development partner and as a substantial shareholder and we look forward to welcoming Liaowu Guo to our board.”
Centrex managing director Gerard Anderson said that under the staged payment arrangements, Centrex would have cash reserves of more than $67 million over the new few weeks.
“With WISCO sole funding the first $75 million in exploration and study costs, Centrex can complete the Wilgerup feasibility study in the knowledge that project funding is almost complete,” he said.
“That combination delivers a sound long-term cash and project funding capability for at least the next three years.”