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Highlights
- Cyclone Metals has signed a Memorandum of Understanding (MOU) with Vale for the Iron Bear project in Canada.
- Vale to provide phased investment, potentially acquiring up to 75% of Iron Bear.
- Vale will support project development through preliminary studies and may loan carry Cyclone’s CAPEX.
Cyclone Metals (ASX:CLE) recently announced the signing of a Memorandum of Understanding (MOU) with Brazilian mining leader Vale S.A. This MOU provides a pathway for Vale to secure a controlling interest in Cyclone’s Iron Bear iron ore project in Canada through a phased investment process.
The partnership is structured in two phases. During the first phase, Vale will invest up to US$18 million to drive essential early-stage development work for Iron Bear. This includes a preliminary feasibility study (PFS), mineral resource drilling, and environmental baseline studies, all of which are necessary to establish the groundwork for the project’s potential.
As the MOU advances into the second phase, Vale has the opportunity to establish a corporate joint venture with Cyclone Metals. At this stage, Vale could gain an initial 30% interest in Iron Bear. This interest could increase to 75% if Vale reaches a Decision to Mine (DTM) or if its investment in the project reaches a cumulative US$120 million.
Throughout Phase 2, both companies would share governance, with each holding two of the five seats on the Iron Bear Joint Venture’s governing board. This equal representation remains in place until Vale achieves its 75% interest in the project, signifying its significant investment in Iron Bear’s progress.
Furthermore, Vale has the option to obtain the remaining 25% share of the project upon reaching the DTM stage, which would grant it full control. However, an alternative pathway exists for Cyclone Metals to retain a minority share: Vale may offer to loan carry Cyclone’s share of capital expenditures (CAPEX), recouping the loan from Cyclone’s share of future project profits. This financial structure provides Cyclone with potential flexibility while enabling Vale to secure the majority interest.
Cyclone CEO Paul Berend expressed optimism about the collaboration, highlighting the complementary nature of Vale’s advanced production capabilities. He pointed to Vale’s leadership in producing high-quality iron ore products, including its cold briquettes and direct reduction (DR) pellets, as aligning well with the Iron Bear project’s objectives.
This partnership positions Cyclone Metals to harness Vale’s extensive resources, both operationally and financially, in advancing Iron Bear toward future production. Cyclone Metals has maintained steady trading activity, recently recorded at 1.9 cents, reflecting ongoing interest in its strategic partnerships and project developments.
