Analysis

With this announcement, Legacy is looking beyond the development of Mt Bevan, itself a sizeable undertaking.  However, with the backing of India's NMDC, has propelled Legacy into a new league as well as value adding for Legacy holders.

NMDC, which is the country’s largest iron ore producer, has a $4 billion war chest for acquisitions in bulk commodities.

NMDC is also pursuing acquisition of other mineral assets in Australia to secure future supplies of coking and thermal coal and rock phosphate for India's steel and fertiliser production.

Mt Bevan will be the initial target project of NMDC to expand its resource base.

An memorandum of understanding between NMDC and Minemakers (ASX: MAK) was executed in June 2011 and negotiations concerning a Joint Venture Agreement are in process.

In 2011, NMDC indicated it was likely to use Legacy Iron Ore as its investment vehicle to make acquisitions.

“The Board of Legacy met with NMDC officials during the week, and were encouraged that both parties could agree on a path forward to advance Legacy and increase value for all shareholders.”

Parallels have been drawn between Legacy and Jupiter Mines (ASX: JMS), whose project neighbours Legacy’s Mt Bevan iron ore project in the Yilgarn region.

Following a placement to Chinese investor Haoning Group of $3.7 million and an off-take agreement to cover 40% of future direct shipping ore produced, the funds under the placement were used to accelerate the development of their iron ore projects.

Since this investment and strategic alliance, Jupiter Mines' market capitalisation has increased from approximately $42m to $528m (undiluted) at present.

One potential benefit from the deal for Legacy would be the potential, particularly with regard to project financing, to take the Mt Bevan Project from exploration to production.

Mt Bevan is a joint venture between Legacy and Hawthorn Resources (ASX: HAW), with Legacy earning a 60% interest in the project by spending a minimum of $3.5 million on exploration.

The two companies are eyeing an upgrade to the JORC Inferred Resource, comprising 617 million tonnes at 32.1% iron at Mt Bevan after completing phase two drilling in November.

Intercepts from the drilling program included 140 metres at 34% iron.

In addition to Mt Bevan, Legacy has iron ore projects in a number of highly prospective regions of Australia, including the Central Yilgarn and the Pilbara.

SRK Consulting has been engaged to calculate a significantly increased inferred JORC resource at Mt Bevan by mid-January 2012.

Mt Bevan is a joint venture between Legacy and Hawthorn Resources (ASX:HAW) whereby Legacy is earning a 60% interest in the project by expending a minimum of $3.5 on exploration.

Legacy and Hawthorn are working towards the ongoing development of Mt Bevan and are exploring the best possibilities to achieve increased value for its shareholders.

For its part NMDC would undertake an investment in Legacy and receive 50% of the equity in Legacy, in return for a $19 million investment. Legacy Iron Ore would become NMDC’s exclusive investment vehicle in Australia.

On September 30 Legacy said NMDC was committed to using Legacy for further acquisitions in bulk commodities.
Several projects have already been reviewed by NMDC and Legacy, including an established JORC coal project.

The samples assayed in the range 10.6 – 33.3% manganese (average 21.8%).

The most significant part of the discovery is the significant manganese mineralisation found at the Black Hill prospect – a low hill covering an area of approximately 300 metres x 100 metres.

There is extensive outcrop of the Balfour Formation shales that show strongly developed manganese mineralisation.

Further mapping and sampling is planned together with an IP geophysical survey. Grid RC drilling and drilling of IP conductors would follow as soon as possible.

Legacy chief executive officer, Sharon Heng said the discovery of significant but undrilled manganese mineralisation points to the potential of our large underexplored project area.

“This is one of several projects that will be aggressively explored with funding from the recently announced agreement with NDMC – India’s National Mineral Development Corporation Ltd.” 

The proposed agreement with NMDC is subject to necessary shareholder and regulatory approvals in both Australia and India.

Significantly, the tenement is located immediately south of the Nicholas Downs 20 million tonne manganese mine which is being developed by a joint venture comprising Hancock Prospecting and PMI (Mineral Resources Ltd).

There, mining has recently commenced of this high grade manganese orebody with targeted production of 600,000 tonnes per annum of 38% manganese ore.

Previous work at the tenement had shown that most of the tenement is underlain by Balfour Formation manganiferous shales, masked in part by surprisingly thin alluvial cover.

The shales are host rocks to the major Nicholas Downs manganese mine located some 25km along strike to the NNE.

Very little exploration is recorded on the tenement – a consequence of masking thin alluvial deposits, and a historic exploration model relying on weathering and supergene enrichment to produce viable manganese deposits on topographic highs.

Recent work, e.g. at the major Woodie Woodie mine to the north, has shown that manganese mineralisation has resulted from hydrothermal fluids moving upwards and precipitating along fault and fracture systems.