Flinders Mines Ltd. said Sept. 2 that it signed a non-binding terms sheet with BBI Group Pty Ltd. for a farm-in and joint venture agreement for the development of the Pilbara iron ore project in Western Australia, with an independent review conducted by the PwC Australia concluding that the Balla Balla iron ore infrastructure project is the most favorable infrastructure option for the Pilbara project.
The first stage of the transaction requires Flinders to establish a new subsidiary into which the assets of the Pilbara project will be transferred, while BBI Group will initially be issued a 10% stake in the new company in exchange for a A$10 million annual funding for a feasibility study estimated to cost at least a total of A$40 million to A$50 million, providing a development plan, and making available project finance for the project and arranging offtake contracts.
The second stage, meanwhile, consists of the final investment decision, wherein BBI Group will have the option to increase its stake at the new subsidiary to 60%, which will reduce Flinders' stake to 40%, in exchange for Flinders being free carried through construction of the Pilbara project to commissioning, an equity funding party for the project development, and by arranging all other financing required to construct the project.
Flinders will retain control of the Pibara project until the final investment decision, which if not reached in an agreed time frame, will allow Flinders to retain 100% interest in the project. Flinders will also have an option to convert to a royalty or other revenue stream at final investment decision, or continue to be free carried to first production.
Meanwhile, Flinders entered into a A$5 million loan facility agreement with PIO Mines, a subsidiary of Tio (NZ) Ltd. to fund short-term capital requirements. The facility will come in two equal tranches, and is in addition to the existing A$3 million loan with PIO Mines.
The company also entered into a subscription agreement with Tio to fund working capital requirements. Tio will subscribe to a maximum A$6.0 million worth of shares, wherein the issue price and entitlement ratio is still yet to be determined, and launch of the rights issue will be no later than April 30, 2020.
In April, Flinders canceled its plan to delist from the ASX.
