Iron ore hopeful Australasian Resources Ltd appears to have secured a major breakthrough on its plans to develop its giant Pilbara iron ore project after negotiating a funding deal with Chinese steel giant Shougang Corporation.
Shougang will invest $56 million into Australasian and has also agreed to fund the US$2.1 billion (A$2.6 billion) cost of its Balmoral South iron ore project by providing an interest-free loan.
Australasian said the interest-free loan will be repayable only out of set percentages of the project's free cash flow.
Shougang, which has a 19 per cent stake in Mid West iron ore producer Mount Gibson Iron, will emerge with a 12.8 per cent stake in Australasian after subscribing for 56 million shares at $1 each.
It will also receive 28 million free attaching options which, if exercised, would pump an additional $42 million into Australasian's coffers.
Queensland mining identity Clive Palmer emerged with a 77 per cent stake in Australasian last year after agreeing to sell the company the rights to mine part of his massive deposits.
The deal followed Mr Palmer's $US285 million transaction with Hong Kong group CITIC Pacific, which bought the rights to mine one billion tonnes of ore at nearby Balmoral.
CITIC is due to pay another $US200 million to earn the rights to mine another one billion tonnes in July.
Shares in Australasian, formerly Sherlock Bay Nickel, have been locked in a trading halt since December 14 pending a financing deal for the South Balmoral project.
Australasian revealed today that entities related to Shougang will have the right to appoint two members to the board of Australasian's wholly owned subsidiary International Minerals while Australasian will appoint four members to the board.
IM holds the interests in the iron ore project.
Australasian said that it would spend up to 15 months undertaking studies on the project, including developing a construction proposal.
The company's release is below:
