Cadence Minerals PLC signed a nonbinding heads of terms with IndoSino Pte. Ltd. to acquire up to 27% of DEV Mineração SA's Amapa iron ore project in Brazil. A binding investment agreement is expected shortly.
Anglo American PLC owned a 70% stake in Amapa before selling it in 2012. Cadence said May 21 that the mine generated an annual operating profit of up to US$171 million during its operation.
The project comprises a large-scale, open pit iron ore mine with associated rail, port and beneficiation facilities.
Under the terms, Cadence and IndoSino will form joint venture company Pedra Branca Alliance Pte. Ltd., which will hold 99.9% of the project. To earn an initial 20% stake, Cadence must first invest US$2.5 million in the venture. Its stake will increase to 27% with a further payment of US$3.5 million.
Should IndoSino seek further investors or investment in Pedra Branca, the agreement also provides Cadence with a first right of refusal to increase its stake to 49%. Cadence's payments are conditional on the Sao Paulo Commercial Court approving a judicial restructuring plan.
Proceeds will be used for initial working capital, a detailed recommissioning study and payment to some past creditors. Cadence said the rest of the required capital expenditure would be raised from project debt.
Shipping of iron ore stockpiles is targeted to start in the fourth quarter. Full recommissioning is projected to take between 12 and 18 months. Production start is expected in 2021.