Australian exploration company FairStar Resources has secured a commitment for A$260m ($249m) in funding from Alliance Super Holdings to develop its Steeple Hill Iron Project (SHIP) in Yilgarn region of Western Australia.
This deal will enable FairStar to meet 80% of the capital requirement to develop the iron-ore mine.
In return, the two companies will form a 50/50 profit sharing venture over the project.
The entire debt of FairStar will be retired, leaving the firm debt free.
The funds will be utilised to start construction and commissioning of a facility at SHIP, build infrastructure facilities and provide additional working capital.
A further credit line of A$640m ($613m) has also been secured as extra capital to the JV when required.
FairStar managing director Kevin Robertson said the funding will allow the company to evaluate the mineral potential of Steeple Hill.
"The future prospects for FairStar have never looked better and this agreement means the company can retire debt and will emerge debt free, while the 50/50 profit sharing joint venture will have significant funding at its disposal well and above that required to transition SHIP into production," Robertson added.
The company is currently in advanced talks with four firms to secure the remaining 20% funding as well as offtake agreements for up to 80% of the initial 20 million tonnes Joint Ore Reserves Committee-compliant resource and four million tonnes of ultra-fines at SHIP.
Although the complete extent of the ore resources is not known, the in-ground indicated resource estimate is valued at A$2.5bn ($2.3bn).
FairStar is planning to execute a three-phase development strategy.
The first phase will mine deposits of alluvial iron ore through low cost operations, followed by commencement of drill and blast operations.
FairStar Resources also plans to commence resource drilling programme at the adjacent North Ship tenement in the near future.
"A full programme of works for North Ship has been approved and in-house estimates believe it is possible that the total amount of ore at North Ship could be multiples of Steeple Hill," Robertson opined.
This move comes as many of the big miners in Australia are increasing their production to meet the surging demand for iron ore in China due to steel overproduction.
Image: Iron ore pellets are used in steel production. Photo:Lars Lentz