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Legacy Iron Ore takeover receives Foreign Investment Review Board approval

Legacy Iron Ore’s (ASX: LCY) proposed takeover by National Mineral Development Corporation (NMDC) has achieved a milestone, with Australia’s Foreign Investment Review Board (FIRB) advising it has no objections to the deal.

Indian company NMDC plans to invest $18.9 million in order to acquire a 50% interest in Legacy.

Legacy shareholders are being asked to approve the Share Subscription Agreement at an Extraordinary General Meeting, which will be held on December 16, 2011.

The acquisition, announced in September this year, would represent the first overseas acquisition by India’s NMDC, which is the country’s largest iron ore producer. NMDC has a $4 billion war chest for acquisitions in bulk commodities.

NMDC and Legacy have previously advised they are looking to acquire and develop additional resource projects to be structured through the investment in Legacy.

“It is pleasing to receive this notification, which is one further positive step completed towards formalising NMDC’s investment into the Company,” Legacy managing director Sharon Heng said.

“The Board of Legacy met with NMDC officials during the week, and were encouraged that both parties could agree on a path forward to advance Legacy and increase value for all shareholders.”

Parallels have been drawn between Legacy and Jupiter Mines (ASX: JMS), whose project neighbours Legacy’s Mt Bevan iron ore project in the Yilgarn region.

Following a placement to Chinese investor Haoning Group of $3.7 million and an off-take agreement to cover 40% of future direct shipping ore produced, the funds under the placement were used to accelerate the development of their iron ore projects.

Since this investment and strategic alliance, Jupiter Mines' market capitalisation has increased from approximately $42m to $528m (undiluted) at present.

One potential benefit from the deal for Legacy would be the potential, particularly with regard to project financing, to take the Mt Bevan Project from exploration to production.

Mt Bevan is a joint venture between Legacy and Hawthorn Resources (ASX: HAW), with Legacy earning a 60% interest in the project by spending a minimum of $3.5 million on exploration.

The two companies are eyeing an upgrade to the JORC Inferred Resource, comprising 617 million tonnes at 32.1% iron at Mt Bevan after completing phase two drilling in November.

Intercepts from the drilling program included 140 metres at 34% iron.

In addition to Mt Bevan, Legacy has iron ore projects in a number of highly prospective regions of Australia, including the Central Yilgarn and the Pilbara.