Cazaly Resources has received a $20 million offer from Mineral Resources (MinRes) to purchase the Parker Range iron ore project in Western Australia.
This proposal includes a binding heads of agreement (HOA) for the Parker Range assets in the Yilgarn region, which Cazaly has accepted.
MinRes operates the Koolyanobbing iron ore operation, also in the Yilgarn region. The Parker Range deposit lies approximately 85 kilometres from Koolyanobbing.
The key terms of the agreement between Cazaly and MinRes include a $20 million cash payment upon completion of the sale, and a royalty of 50 cents per tonne of iron ore extracted after the first 10 million dry metric tonnes.
The HOA is conditional upon (within 21 days of execution of the agreement): MinRes being satisfied with its due diligence investigations of the project, approval of both parties boards, and the parties receiving all necessary consents and approvals from the state minister under the Mining Act 1978 (WA).
Both parties will use reasonable endeavours to enter a more comprehensive sale and purchase agreement, as well as a royalty agreement within 30 days, however, in the absence of such, the HOA remains binding on both parties.
MinRes has secured the agreement after Cazaly terminated an exclusivity period with Gold Valley Iron for Parker Range.
Cazaly reserved the right to terminate the Gold Valley exclusivity period should it receive a more favourable proposal from a third party.
The HOA proposal from MinRes was considered more favourable to both Cazaly and its shareholders.
Therefore, Cazaly terminated the exclusivity period with Gold Valley, resulting in a break fee of $250,000 payable by Cazaly.