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Helix Resources Unlocks Value Of South Australian Magnetite Assets, Receives $1.5m Payment

Helix Resources (ASX: HLX) is successfully executing the company strategy of unlocking value from the company's projects, and has now received the first payment of $1.5 million from Lodestone Equities over the Olary Magnetite Project in South Australia.

Helix has executed a Share Subscription Agreement with Lodestone over Olary which assets include tenements EL3956 and EL4022 which are prospective for Braemar Fe Formation, reflecting the terms of the MoU announced last month.

Lodestone has now acquired a 33% shareholding in Olary (which was a wholly owned subsidiary of Helix) with an up-front cash payment of $0.5 million and another $1 million towards the proposed work program.

When all of the approvals have been received to enable drilling to commence, Lodestone will provide a further $1 million to Helix to earn 50% in Olary. Helix will oversee the work program, receiving a management fee.

Greg Wheeler, chairman of Helix, spoke with Proactive Investors today, and said that the company is targeting a start to drilling before the end of 2012.

The program will include around 12,000 metres of drilling (11,000 metres reverse circulation and 1000 metres diamond), covering around 100 holes - with the data to be used to establish a maiden JORC Resource.

Lodestone then has one month after receipt of the independent JORC Report to elect whether to acquire the remaining 50% shareholding in Olary by an additional cash payment calculated in accordance with the following formula: Cash Payment = JORC Resource tonnes x DTR% x $0.035 x 150%, with a floor price of $5 million and a cap of $9 million.

If the Option to acquire the remaining 50% is not exercised by Lodestone, the parties will operate Olary as a corporate joint venture.

Wheeler added, "The Olary deal is an example of the unlocked value of our projects. It raises funds during challenging market conditions and supports our business model of targeting prospective areas and spending money in the ground to drive our Projects up the value curve."

Olary proximity to plus billion tonne projects

Olary is located in a highly prospective region and is in close proximity to some plus billion tonne projects, including Mutooroo (1.5Bt) which is less than 20 kilometres away and Hawsons (1.4Bt) which is 50 kilometres away.

Comment

The deal monetises Helix's South Australian magnetite assets, providing the company with a cash injection from non core assets to focus on its portfolio of highly prospective copper-gold assets in Australia and Chile.

It is also worth noting the experience from Lodestone, which is an investment company associated with Gordon Toll, who has 44 years experience in mining including as chairman of Fortescue Minerals Group (ASX: FMG) during the critical engineering and funding of the company's initial US$3.3billion development of its Pilbara iron ore interests.

Even if Lodestone chooses not to acquire the remaining 50% of Olary Magnetite Pty Ltd, Helix has acquired substantial expertise and funding to advance Olary and will retain exposure to a prospective asset while significantly reducing the associated risk.

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