A mineral exploration company, Lion One Metals Limited (ASX: LLO) on 12 April 2019 announced that it has entered into an agreement to sell its interests in the Olary Creek (OC) magnetite project in South Australia. It also includes the sale of 51% tenement interest followed by 100% interest in other commodities, as well as a 47% interest in iron ore and manganese rights.
Through this sale, the company would realize value from this non-core asset. The company will be receiving the payment in stages during the course of time.
- The purchaser will be paying the company, 10% of all funds raised until funding specifically designated as funding for a Bankable Feasibility Study (BFS) has been raised.
- The purchaser will make a payment of another A$1 million upon designated BFS.
- The purchaser will pay the payment of another A$3 million upon a Decision to Mine.
- Eighteen months post the decision to mine, the remaining A$3 million will be paid by the purchaser.
Apart from that, Lion One will be retaining a royalty of 1% FOB (free on board). The royalty is levied on the metal concentrates (Fe and Mn) that are sold and extracted from the OC prospect.
Through this agreement, the company would be able to generate considerable future income through the royalty stream. The Olary Creek project contains 510 million tonnes of magnetite that is of high-grade with low impurities. The company stated that out of the 510 million tonnes of high-grade magnetite, only 35% of the highly magnetic mineralized target had been drilled to date.
The purchasing group consists of two companies that are owned by Gordon Toll who is an Australian mining entrepreneur. These two companies are Lodestone Equities Limited and its subsidiary Olary Magnetite Pty Ltd. Both these companies along with the Olary Creek project will now become a part of the Braemar Bulk Export Project of South Australia. At the site, there is a five billion infrastructure passage that is planned to ship magnetite distillates from the Braemar region in South Australia to offshore loading and storage facilities near Adelaide. It will be used for shipping the magnetite concentrate to the manufacturers in Asia.
In July 2013, Lion One and China’s Henan Yukuang signed a JV agreement. The agreement was for the purpose of exploration and the development of the Olary Creek project. Here, the company had 22% participating interest, 25% interest-free carried to the completion of a feasibility study as well as the decision to mine. It also had the option to contribute to its proportional share of development expenses or convert its twenty five percent interest into the two percent royalty, or it can convert one percent royalty with a fifty cent per tonne production royalty.
Yukuang, the current JV partner of Lion One is being notified by the company about the agreement to sell its interest in the project. Besides, Yukuang holds a pre-emptive right , and it will inform the company if it will be exercising the right or not.
Also read: Lion One’s partnership with the Meeco Group, Swiss-based Clean Energy Provider.
In the previous six months, the stock generated a return of 37.5%. The shares of LLO traded last on 11 April 2019 at A$ 0.660. LLO holds a market capitalization of A$67.66 million and approximately 102.52 million outstanding shares.
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