Moly Mines will sell ore produced at its Spinifex Ridge Iron Ore Mine in Australia to Mineral Resources (MRL) at the mine gate, following the clearance of the transaction by shareholders on Wednesday.
MRL will pay around A$38m ($35.2m) to Moly's subsidiary, Moly Metals Australia, for the iron ore in two installments, but Moly said the purchase price will depend on the actual minimum product tonnage that will be determined based on the tonnage availability under the current mine plan.
The iron ore mine forms part of the Spinifex Ridge tenement in the Pilbara region of Western Australia, along with Spinifex Ridge Molybdenum-Copper Resource.
Spinifex Ridge is estimated to hold nearly 2.4 million tonnes of marketable iron ore graded above the average cut-off of 58% Fe.
The first installment of the purchase price will be paid in cash on 12 July and the second installment after the exhaustion of the economic life of the mine, based on the quantity and quality of iron ore mined during the period.
MRL will take over the operations of the mine till the end of its life but will continue to use the contractors appointed by Moly Mines.
On completion of the transaction, Moly Mines expects to have A$80m ($74.2m) in cash and liquid assets, which it intends to utilise for merger and acquisition opportunities with emphasis on copper and gold assets.
A statement from the company said, "Current market volatility, combined with a strong balance sheet, puts our Company in a strong position to acquire projects.
"The focus will be on near term production assets where the company's surplus cash can be applied in the short term. The company would seek to avoid high sovereign risk jurisdictions. The ultimate objective, however, is to find an appropriate project for the company, which means that the criteria will not be rigidly applied."
Image: The consideration to be paid by MRL to Moly Mines will depend on the quality and quantity of the ore. Photo: Courtesy of Lars Lentz.