Fenix Resources Ltd (ASX:FEX) has agreed to transfer all of its assets, liabilities, rights and obligations under the decommissioned Extension Hill Iron Ore Mine to Terra Mining Pty Ltd and Extension Hill Pty Ltd (EHPL) in a deal described as a “logical consolidation”.
The mine operations are part of the Mid-West iron ore, port and rail assets Fenix acquired from Mount Gibson Iron (ASX:MGX) Ltd in July this year.
The three parties have signed a binding agreement for Fenix to effect the transfer in return for $250,000 and royalty of $0.50 per tonne of material produced and sold from the buyers’ Extension Hill Magnetite Project, up to a cap of $1.75 million.
The buyers will also take over about $5 million in rehabilitation obligations Fenix assumed from Mount Gibson as part of the Mid West transaction.
Precursor to something bigger
“The Extension Hill Magnetite Project is an exciting regional development,” Fenix chairman John Welborn said.
“The Extension Hill assets we acquired from Mount Gibson hold little value for Fenix, but have significant immediate value for the buyers as they move into production.
“The opportunity to recommission the Mount Gibson crushing and screening plant provides potential for larger-scale magnetite processing in the future.
“Fenix is investigating further opportunities for collaboration on haulage and port services.
“The transaction is a logical consolidation, which will provide Fenix with future payments of up to $2 million while also removing a rehabilitation liability of approximately $5 million.”
Transaction details
The Extension Hill Iron Ore Mine assets consist of a large-scale crushing and screening plant, associated equipment, and interests in an operational 138 bed mining camp, which were all on long-term care and maintenance following the completion of mining activities by Mount Gibson in early 2021.
Under the asset transfer, EHPL will acquire the mining camp and Terra Mining will acquire all the other assets including the crushing and screening plant. inventory of crusher spare parts, and various contractual rights, consents and authorisations.
The key conditions that need to be met prior to the conclusion of transaction include:
- Fenix completing its acquisition of the Extension Hill Assets under its contract with Mount Gibson;
- The parties entering into a deed of assignment and assumption relating to agreements governing the mining rights and related matters; and
- The parties entering into a deed of assignment and assumption relating to the existing native title agreement.
The $250,000 payment is payable on the earlier of one month after the first shipment of ore from the buyers Extension Hill Magnetite Project and 12 months after completion of the transaction, expected in the December quarter.
Shareholders’ approval is not required for the deal.