THE BOURSE WHISPERER: Legacy Iron Ore and National Mineral Development Corporation have proposed a formal Share Subscription Agreement which will result in NMDC subscribing for a placement in Legacy.
The proposal follows an announcement by the company in May of the signing of a non-binding Memorandum of Understanding between the two companies.
A subsequent independent valuation was conducted by NMDC on Legacy’s assets.
The Legacy Board has now agreed to a proposal from NMDC that involves the latter subscribing for approximately $18.89 million in equity for 50 per cent of the former.
The proposal is subject to Legacy shareholders’ approval at a meeting that has been pencilled in for November as well as Foreign Investment Review Board approval.
“We are delighted to have secured India’s National Mineral Development Corporation Limited as a cornerstone investor in Legacy,” Legacy Iron Ore chief executive officer Sharon Heng said in the company’s announcement to the Australian Securities Exchange.
“It is NMDC’s first investment outside of India, and after conducting extensive due diligence on Legacy, NMDC have concluded that we are the ideal entry point for them into the Australian iron ore and resource sector.
“NMDC is not only providing Legacy with funding through the placement, but their presence on the register will create additional opportunities for Legacy, such as the acquisition and divestment of various projects.
“Since announcing the Memorandum of Understanding in May this year, and indicating that Legacy was actively seeking new projects, we have been inundated with offers to joint venture and fund numerous advanced resource opportunities, including several in gold, iron ore and coal, with JORC resources.”
Legacy has earned a 60% interest in the Mount Bevan Joint Venture with Hawthorn Resources, by spending $3.5m.
The company has spent $1.49m towards earning its 60% interest and is currently undertaking stage two drilling, spending an additional $0.71m.
Upon completion of stage 2, Legacy will have spent approximately $2.2m, with the remaining $1.3m likely to be spent before the end of 2011, at which time Legacy will successfully acquire a 60% interest in Mount Bevan.
“With NMDC on the register, and significant financial backing, upon completion of the placement, Legacy will be in a position to actively acquire such projects, to further increase shareholder value,” Heng said.
Legacy said NMDC’s proposal provides the company with a number of significant benefits, including:
– A substantial cash injection, which will ensure that Legacy’s ongoing funding obligations under its various joint venture agreements will be met, and which will assist in progressing the development of its assets, regardless of market and financial conditions;
– Access to new acquisition opportunities, via a strategic relationship with NMDC;
– Access to the technical, financial and industry experience of NMDC in the iron ore sector;
– Opportunity for Legacy to be NMDC’s preferred vehicle in Australia, as part of its global expansion; and
– Access to project finance.