Utah-focussed Golden State Resources (ASX: GDN) has struck a deal to sell its interest in the Johnson Range Iron Ore Project, in the Yilgarn region of Western Australia to a local subsidiary of US company Cliffs Natural Resources (NYSE: CLF) for A$3M.
Golden State will also receive a gross royalty of 2% on iron ore sales from the tenements as well as a 2% gross royalty on the sale of all other minerals transported from the project.
The A$3M will be paid to Golden State in the form of a non-refundable royalty prepayment and is payable on the execution of a formal agreement on or before April 30th 2010.
Richard Sciano, managing director of Golden State said, “after much consideration, and a review of a range of development opportunities, the board felt that Cliffs were a perfect choice to ensure the timely development of the Johnson Range Iron Ore Project.”
He said “We felt that Cliffs’ proven development and mining abilities would ensure the project was developed to the benefit of the Company and its shareholders, and allow the Company to focus its attention on the development of its other assets, in particular its Golden Eagle gas field in the US.”
Cliffs Asia-Pacific Iron Ore business unit operates the Koolyanobbing and Cockatoo Island mining operations which sold 8.5 million tonnes of iron ore in 2009. The Johnson Range tenements adjoin Cliffs existing Yilgarn developments and can be developed to supplement exports via Esperance.
The sale will entitle Cliffs, an existing producer in the region, to contribute to the development of the Johnson Range Iron Ore Project and is seen as an ideal way to accelerate the project development.
The Yilgarn region of Western Australia is predicted to emerge as the second largest iron ore producing area in Australia, with existing infrastructure and port facilities at Esperance the area is well ahead of other emerging iron ore producing areas.
Disclosure: The author holds no positions in the company