Bauxite Resources Ltd (ASX: BAU) has reported that Yankuang Corporation (Yankuang) has been granted FIRB approval to subscribe for 19.7 million shares in BRL at $0.50 per share and also for joint ownership with BRL of a proposed Alumina Refinery in the Southwest of Western Australia.
The company said in a statement it would honour the $0.50 issue price as the share price had risen sharply after the announcement.
In essence, the agreement with Yankuang will provide for the partners to explore and exploit over time a total area of 1000 square kilometres of BRL’s tenements (granted or under application) in the Darling Range in the south west of Western Australia. Costs will be borne by BRL 51% and Yankuang 49%.
BRL and Yankuang will undertake all works and studies necessary to obtain a BFS for the development of the proposed alumina refinery.
The BFS is to establish refinery grade bauxite of no less than 150 million tonnes, with a target of 300 million tonnes. The bauxite will form a dedicated supply to the proposed refinery by BRL.
Yankuang will contribute 75% of the costs of the proposed alumina refinery to earn a 50% interest in the proposed refinery. BRL will receive a 25% free carried interest and will fund a further 25% to bring its interest up to 50%.
BRL will receive a 25% free carried interest in the proposed Alumina Refinery with a value circa $375 million.
In addition, the joint venture will supply bauxite to the refinery at cost plus 15% for an expected life of 50 years. For these reasons, the board of BRL has resolved to proceed with the placement because in the board's opinion the benefits far outweigh the “cost” of the lower issue price.