Iron ore miner Territory Resources is to divest its 73 per cent holding in listed mineral sands miner Olympia Resources Ltd as part of a move out of mineral sands.
Territory said on Wednesday the divestment was "consistent with (Territory's) re-alignment strategy of focusing on (its) core strengths as a disciplined, high quality iron ore producer".
Olympia was a non-core asset, Territory said in a statement on Wednesday.
Territory said it had signed a conditional agreement with Olympia Resources and Stirling Resources Ltd to transfer its interest in Olympia and assign outstanding inter-company loans previously provided by Territory to Olympia for $1.75 million cash, which is equivalent to Olympia's debt to Territory.
The transaction is conditional on Olympia acquiring the mineral sands assets of Stirling Resources for $6 million.
These assets come from Matilda Minerals, of which Territory holds 30 per cent.
The Olympia divestment also is conditional on the consent of Territory's financiers under standstill arrangements announced on April 1, 2009, and of Olympia shareholders.
Territory acquired its 73 per cent interest in Olympia in 2007 and early 2008.
In July, 2008, Territory acquired a further 71 million shares by way of a rights issue under a sub-underwriting agreement of May 27, 2008, as part of a previous diversification strategy.
Territory's interest and share of Olympia's assets on consolidation amounted to $16.5 million.
Territory said it expected a non-cash, accounting loss of approximately $11 million under the transaction, the exact amount of which would be determined at the date of settlement.
The loss will be expensed against operating profit during the 2010 financial year.
"While it is regrettable that this transaction will crystallise a further loss from Territory's former broad investment and diversification strategy, in our view this represents a sensible outcome which further reinforces our strong commitment to divest non-core holdings and maintain our focus on our iron ore business," said Territory's chairman, Andrew Simpson.
"As part of this strategy, we have no intention of pursuing operations or assets in the mineral sands sector, and this enables us to effectively recoup the outstanding balance of the inter-company loan and divest this non-core holding in a sensible and coordinated manner."
Territory said the re-alignment strategy had been "delivering significant benefits in achieving key production and cost targets at the Frances Creek Iron Ore Mine".
Source: The Age, Melbourne
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