NMDC Ltd, the mining major, is set to acquire about 50% stake in Australia-based Legacy Iron Ore.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

The deal is seen costing under $100 million.

“The deal should be through any time,” one person, a senior company official who refused to be identified, said.

Legacy has sought halting of trading of its shares on the Australian Securities Exchange as a prelude to the announcement.

“Legacy Iron Ore has indicated that National Mineral Development Corporation Ltd (NMDC) has finished due-diligence work and anticipates receiving a formal offer by NMDC to be tabled during the week commencing August 22, 2011. Legacy has provided relevant information (exploration, legal and financial) sought by the various independent experts who are conducting due diligence on behalf of NMDC,” Legacy said in its filing to the Australian Securities Exchange or ASX.

NMDC and Legacy have been working on the deal for some time now, and their first memorandum of understanding to take the deal forward was signed on May 24.

According to Legacy, the stake sale would enable the Australian miner unlock and monetise the value inherent at Mt Bevan and gain from a large cash infusion.

Mt Bevan offers low-strip ratios, coarse grind size, low silica and an average concentrate grade of 69.8% iron content.

Importantly, the project is located close to road, rail and an existing deepwater port, mitigating the need for excessive investment in infrastructure.

NMDC is keen on using Legacy as a vehicle to acquire large-scale Australian bulk commodity projects such as coal and iron ore.

Legacy holds prospective iron ore tenements in both the central Yilgarn and Pilbara areas of western Australia.

All the projects are said to be located close to the established infrastructure area.

NMDC is floating a subsidiary in Australia to handle the deal and also look at other investment options.

Legacy has licences for two iron ore projects in Australia with an estimated reserve of over 130 million tonnes and is also into gold and manganese mining. It has also been working on making forays into coal mining.