Hebei XingHua Iron and Steel takes 34% stake in Dynasty Metals Australia
Dynasty Metals Australia has received a letter of offer from
the Chinese steel producer Hebei XingHua Iron and Steel, a subsidiary of XingHua Industrial Company, comprising a
placement to XingHua of 40 million new shares in Dynasty at a price of
$0.16/share to raise AU$6.4 million
The Dynasty Board said it
has accepted the letter of offer, which is subject to shareholder,
regulatory and Government approvals.
In addition, the offer makes
provision for the issue of 20,000,000 options with an exercise price of
$0.20/option and an expiry date of 31 December 2012.
The offer
provides a strong cash position of $10 million to accelerate drilling at
Prairie Downs Iron Project – increasing from 453 million tonne
JORC-compliant Inferred Resource and supporting pre feasibility studies.
The
new shares will be placed on voluntary escrow for 12 months from the
date of issue. Subject to shareholder and other approvals, XingHua will
have a 34% interest in the company and Dynasty’s cash position will be
approximately $10 million.
Ian Levy, Dynasty's chairman, said
“the letter of offer from a significant Chinese Steel producer, XingHua,
is a strong endorsement of Dynasty’s investment attractions. This
strategic partnership will provide a strong foundation to support the
enhancement of project assets and corporate growth."
The
strategic partnership between XingHua and Dynasty provides access for
Dynasty to the annual 30 million tonne, Hebei iron ore market.
XingHua
is to provide ongoing funding, assistance with infrastructure
requirements, and executive/technical support.
The company said
XingHua’s offer is an endorsement to the technical credibility of
Dynasty’s Prairie Downs Project and its exploration team and reflects
the significant potential presented by the company’s project portfolio,
and the calibre of the Pilbara as one of the world’s leading Iron Ore
provinces.
"XingHua views Dynasty as an attractive and
undervalued investment opportunity backed by a strong board and team of
leading technical consultants, and will support both development and
commercialisation of our projects through potential off take," said
Levy.
"Dynasty continues to build on the established 453 million
tonne inferred JORC resource in its current drilling program, and
pending shareholder approval, the placement to XingHua will enable the
company to further expedite exploration activities and pre feasibility
studies,” he added.
Dynasty and XingHua have negotiated the key
terms of a relationship agreement as follows:
- XingHua will be
closely involved in the management of the Company and the exploration
and evaluation of all projects. This will include the appointment of two
XingHua representatives to the board of Dynasty.
- XingHua will
share an office with Dynasty in Sydney where XingHua may undertake
business when XingHua representatives are in Australia.
- XingHua
will invest in a representative office in China for Dynasty and will
assist with introductions to potential 3rd party iron ore infrastructure
providers. XingHua accepts that Dynasty will retain the right to freely
progress discussions with other suitable infrastructure providers to
ensure access to infrastructure is secured.
- To the extent of its
iron ore requirements, XingHua has a priority for iron ore off-take
based on normal commercial terms.
- With respect to production
surplus to XingHua’s requirements, XingHua will assist Dynasty to
progress discussions with other steel producers and Dynasty will retain
the right to enter into negotiations with other 3rd party off-take
parties for the remainder of the iron ore.
These arrangements
provide for both immediate and future financial support, and ensure
XingHua will be directly involved in the management of the company, will
assist with future funding and infrastructure needs, and it will also
operate its iron, coal and steel trading activities alongside Dynasty in
its Sydney office.
Malcolm Carson, Dynasty executive director,
added “through Dynasty’s representative office in China provided by
XingHua, we will have a presence in China, a highly respected and well
connected relationship partner, a basis on which to establish iron ore
off-take arrangements, high level introductions and access to Hebei
steel mills producing 20 million tonnes per annum steel and requiring in
excess of 30 million tonnes per annum of iron ore.”
XingHua
Industries was founded in 1985 by Mr Maochun Chen, a former Army Cadre,
with its headquarters located in the town of FuzHou City, Fujian
Province near China’s South East coast.
With an annual value
exceeding tens of billions of Yuan, the company is a modern private
enterprise including a complete organisation of party and political
entities and a labour union.
XingHua Iron and Steel has an
annual demand for approximately 3 million tonnes of iron ore and is
currently being supplied from Australia, India and internal Chinese
sources.
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