THE BOURSE WHISPERER: Pilbara iron ore producer BC Iron has entered into an Iron Ore Strategic Alliance with Brazil-focused iron ore development company Cleveland Mining Company.
Under the terms of the Alliance, BC Iron will take a five per cent equity stake in Cleveland at 64 cents a share, spending approximately $6 million.
As part of the placement, and subject to it maintaining its five per cent holding and regulatory approvals, BC Iron will have top up rights for two years enabling it to participate in any new offerings so it can maintain its percentage interest.
BC Iron and Cleveland will form a 50:50 joint venture aimed at acquiring and developing new iron ore projects in Brazil.
BC Iron indicated it would continue to focus on its Pilbara operations in line with its three tiered growth strategy, the third tier of which is this latest announcement.
BC Iron said the new JV with Cleveland Mining provides the opportunity for it to enter the Brazilian iron ore space without the long lead time needed to ‘come up to speed’ in a new jurisdiction, and at a relatively low cost.
“This new Joint Venture will allow BC Iron to enter a new country and new market with key people, relationships and their intellectual property already in place,” BC Iron managing director Mike Young said in the company’s announcement to the Australian Securities Exchange.
“The nature and size of the transaction is entirely consistent with our stated Business Development strategy.
“Brazil has a vibrant iron ore industry including a domestic market, a very skilled and able workforce and geology that is very prospective for further discoveries.
“In fact, where I see a mature iron ore industry in Australia with limited infrastructure availability, in Brazil I see a growing industry in a growing country.”
BC Iron has taken the Nullagine Joint Venture with Fortescue Metals Group in the Pilbara from an exploration play to reach to its current production rate of five million tonnes per annum in May this year.
Similarly, Cleveland has been focussed on its current project hubs and therefore has not been in a position to date to assess other iron ore project opportunities.
According to the two companies the new Alliance will enable each to advance their growth plans at a greater rate.
“BC Iron has successfully built a 5 million tonnes per annum Joint Venture operation, with Fortescue, in the Pilbara in rapid time,” Cleveland Mining Company managing director David Mendelawitz said.
“They have the leadership, experience and financial strength that make for an excellent JV partner.
“Cleveland is conducting a scoping study on the Ferradura project, in order to build its own 5 million tonnes per annum operation in Amapá state in Brazil.
“The collaboration with BC Iron will allow the company to drive its growth plans beyond Ferradura without delay, whilst providing BC Iron with exposure to the amazing potential of Brazil.
“Most of Cleveland’s Board and many of our managers have previously worked with the management of BC Iron in the past and we look forward to resuming the relationship.”