Mount Gibson Iron has confirmed Shougang Concord and SCIT Trading’s new terms as guarantor and buyer under the existing Koolan Island offtake agreement with Newton Resources and its subsidiary Ace Profit Investment.
Under the proposal, Newtown will act as guarantor under the Koolan offtake and Ace as buyer.
Newton is principally engaged in the supply and trading of iron ore, iron concentrates, coals and stone products.
The company is seeking to expand its iron ore trading business through existing relationships with steel mills on the Chinese mainland, and has previously purchased iron ore from Mount Gibson’s operations.
In addition to Newton’s guarantee, Ace’s obligations as buyer are further supported by a $US75 million ($108.2 million) guarantee provided by VMS Investment Group, a prominent Hong Kong-based private investment entity with a 28.7 per cent shareholding in Newton.
Shougang Concord is a substantial shareholder in Shougang Fushan Resources, which holds an indirect 14.5 per cent shareholding in Mount Gibson.
Under the existing Koolan Island offtake arrangements, Shougang Concord and SCIT hold a longstanding life-of-mine offtake agreement to purchase 80 per cent of available iron ore product from Koolan Island.
Novation agreements and guarantee documents have been negotiated and executed, and the Koolan offtake agreement updated to reflect the new entities involved.
The update also includes references to relevant high grade (+65 per cent iron) ore market indices, and other minor changes to improve the operational efficiency of the offtake for both buyer and seller.
The novation and guarantee arrangements remain conditional upon Newton and Shougang shareholder approval and a legal opinion confirming valid execution of documentation.