Fe Limited (ASX:FEL) is set to add $7 million in cash to its bank balance after shareholders on Friday approved the sale of FEL’s Evanston royalty interest over a portion of the Koolyanobbing Iron Ore Mine in WA.
When put to the vote at an extraordinary general meeting, there were more than 184 million votes for the sale recommendation and just 183,821 against.
Approval of shareholders was one of the conditions of a sale and purchase agreement with TRR Services Australia Pty Ltd, a subsidiary of Trident Resources PLC (LSE:TRR).
This agreement provides for cash consideration to be paid in two instalments with the first $4 million payable upon completion of the transaction and the remainder payable one day after the first anniversary of completion.
The sale provides certainty for FEL’s financing position as the royalty stream is variable and depends on a range of factors such as the iron ore price, currency and production rates over which FEL has no control.
Apart from providing financial certainty, advantages of the sale are:
- The transaction provides the company with $7 million in cash (before costs associated with the transaction);
- The transaction will allow the company to consider other acquisitions which may increase shareholder value; and
- The transaction provides the company with working capital to explore its prospective Pilbara landholding, including following up the recent copper drilling program completed at Hillside.
FEL’s Evanston iron ore royalty is a 1.5% dry metric tonne, FOB royalty over two tenements, one of which is within Mineral Resources Limited’s (ASX:MIN) Koolyanobbing project in the Southern Yilgarn Iron Province.
This tenement covers one of the current pits in the Koolyanobbing Iron Ore Project, known as Deception.
FEL has received $1.829 million in the last 12 months from the sale of 1.228 million tonnes following the recommissioning of the mine in December 2018.