China’s third largest steel group Wuhan Iron and Steel (WISCO) yesterday entered into a joint venture with Adelaide-based Centrex Metals, which could see the investment of up to $186 million in South Australia’s iron ore sector.
Centrex’s secretary Gavin Bosch told MINING DAILY that WISCO will acquire a 60% interest in five of the company’s tenements in the southern and central regions of the Eyre Peninsula.
The joint venture also plans to develop two magnetite iron ore projects from deposits north of Port Lincoln, which could each produce up to five million tonnes a year.
According to Bosch, under the terms of the agreement, WISCO could pay up to $186 million if certain conditions are met.
“Only $78 million of the investment is guaranteed as a direct payment. There are four different stage payments that will be payable if the tenements turn out to contain a certain level of resources,” he said.
“If there ends up being two billion tonnes of material, then all of the $186 million is payable to Centrex.
“We have agreed to stage the payments in order to de-risk the agreement, as the tenements are only at the exploration potential stage.”
The two mines are expected to come online over the next five to seven years.
Bosch believes the agreement will go a long way to tackling the amount of exploration required as well as raising the necessary capital to establish the mines.
“We are pretty excited about the possibilities of those tenements. I think having such a big player like WISCO on board as a partner will give us a lot more flexibility in what could be a big project,” he said.
The agreement is subject to government approval and Centrex will send submissions to the Australian Foreign Investment Review Board (FIRB) and the National Development Reform Commission (NRDC) immediately.
According to Bosch, the company is optimistic of receiving the green light.
“We’ve had some positive feedback from both the FIRB and the NDRC,” he said.
“However, it is important to note there a no guarantees at this stage.”