Melbourne (Platts)--4Feb2013/542 am EST/1042 GMT
Fortescue Metals Group has decided not to proceed with the acquisition of the Iron Valley iron ore deposit in Western Australia from Iron Ore Holdings, leaving the junior miner free to potentially sell the asset to another party. Australian FMG paid IOH A$25 million ($26 million) in February last year for exclusive rights to the Iron Valley deposit, which it had planned to develop with its adjoining Nyidinghu deposit. But the two companies said Monday they had agreed to terminate the acquisition option because FMG will not develop Iron Valley as quickly as had been envisaged. It was, however, not made clear what development timeline the companies were working towards. The option was due to expire at the end of March, at which time FMG would have been obliged to pay a further A$20 million if it wanted to proceed with buying the deposit. IOH is reimbursing FMG A$4 million of the original $25 million cash payment made last year because the option is being terminated ahead of the March 31, 2013, deadline. IOH was also due to receive 2%-5% royalty payments on FOB revenues achieved from iron ore sales at Iron Valley, which it would have used to develop its Buckland iron ore project in the Pilbara. Article continues below...Request a free trial of: Steel Markets DailySteel Markets Daily provides transparent daily and weekly assessments of iron ore, coking coal, coke, ferrous scrap and ferroalloys prices, plus insightful analysis and commentary on the day's market activities.
Fortescue Metals Group has decided not to proceed with the acquisition of the Iron Valley iron ore deposit in Western Australia from Iron Ore Holdings, leaving the junior miner free to potentially sell the asset to another party. Australian FMG paid IOH A$25 million ($26 million) in February last year for exclusive rights to the Iron Valley deposit, which it had planned to develop with its adjoining Nyidinghu deposit. But the two companies said Monday they had agreed to terminate the acquisition option because FMG will not develop Iron Valley as quickly as had been envisaged. It was, however, not made clear what development timeline the companies were working towards. The option was due to expire at the end of March, at which time FMG would have been obliged to pay a further A$20 million if it wanted to proceed with buying the deposit. IOH is reimbursing FMG A$4 million of the original $25 million cash payment made last year because the option is being terminated ahead of the March 31, 2013, deadline. IOH was also due to receive 2%-5% royalty payments on FOB revenues achieved from iron ore sales at Iron Valley, which it would have used to develop its Buckland iron ore project in the Pilbara.
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Steel Markets Daily provides transparent daily and weekly assessments of iron ore, coking coal, coke, ferrous scrap and ferroalloys prices, plus insightful analysis and commentary on the day's market activities.
A Perth-based spokesman for IOH said work at the Iron Valley deposit had been progressing over the past twelve months so no time had been lost in developing the project. He said the "amicable" agreement with FMG meant IOH could discuss development of Iron Valley with other companies. Iron Valley has a JORC resource of 260 million mt and a pre-feasibility study has shown that a 12 million-15 million mt/year operation with a 15-year mine life is viable. FMG plans to reach iron ore production capacity of 155 million mt/year by the end of 2013 -- compared with 100 million mt/year currently -- which is six months later than originally intended. The miner said any further development beyond this target would depend on "customer requirements and market conditions."--Paul Bartholomew, paul_bartholomew@platts.com--Edited by Geetha Narayanasamy, geetha_narayanasamy@platts.com
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