On May 4, Australian mineral resources company Western Plains Resources (Western Plains) announced the signing of a legal joint venture agreement with China's third largest steelmaker Wuhan Iron and Steel Group (WISCO) to assess its Hawk's Nest magnetite deposits south of Coober Pedy in South Australia.
According to the terms of the binding deal, WISCO has agreed to solely fund a minimum commitment of $25 million to earn a 50 percent participating interest in the joint venture. This amount will be spent on a bankable feasibility study for the development of one or more of Western Plains' magnetite deposits at Hawks Nest.
In addition, WISCO can choose to contribute another $20 million, without increasing its stake.
The Chinese company has also agreed to subscribe for 12.1 million new Western Plains shares, for a total amount of approximately $3 million.
The Hawk's Nest deposits have a combined resource of 569 million mt of iron ore at an average grade of 35 percent Fe. The resource is spread across six known deposits. Western Plains completed a scoping study on the project in April 2008.
In its statement on the issue, Western Plains said, "This study suggested that a project to produce six million mt per annum of concentrates from the treatment of 13.5 million mt of ore per annum with a project life of 30 years could be viable. It is possible that the project could support the production of more than 10 million mt per annum of concentrate for more than 30 years."
WISCO would have the right to buy half of the mine's production on an arm's length basis.
Western Plains said that WISCO also would help it arrange funding for its share of the cost of the project should it be brought into development.
Western Plains expects the bankable feasibility study to be finished in 2012.
The deal requires approval from the Australia Foreign Investment Review Board.