Western Australia-based explorer and producer Aquila Resources Ltd has reached a strategic co-operation agreement with the Chinese steel giant Baosteel to develop its iron ore, coal and manganese projects.
Under the deal, Baosteel will take up to 15 per cent of Aquila, investing up to $286 million in return for as many as 43.95 million shares in Aquila.
Baosteel will work with Aquila to develop the Australian company's steel raw materials projects, including iron ore, coal and manganese.
"The strategic co-operation that has been established by the signing of these two agreements is expected to deliver significant long-term benefits for both Aquila and Baosteel, and significant benefits to both Australia and China," Aquila said in a statement on Friday.
"This is a transforming event for Aquila. China's largest steelmaker has established a strategic cooperation with Aquila, not only to make a major investment in the Company, but also to advance participation in some of the important projects in the Company's portfolio.
"For Baosteel, this represents its first major international strategic investment in a public company and is an important transaction in Baosteel's strategy to secure long-term supply of critical steel raw materials for its steel making business."
Under the deal, Baosteel will take up to 15 per cent of Aquila by paying as much as $285.6 million for as many as 43.95 million shares at $6.50 per share.
Aquila's shares shot up when they resumed trading on the Australian stock exchange on Friday, following the release of the statement, rising 73 cents, or 11.15 per cent, to $7.28 by 1013 AEST.
Aquila said Baosteel would work with it to source low cost financing from Chinese financial institutions for its major projects, and Baosteel would get preferential opportunity to invest directly in and develop those projects.
Baosteel vice president, Dai Zhihao, has been nominated to join the Aquila board.
The deal depends on regulatory approvals both in Australian and China, including from the Foreign Investment Review Board.
Aquila said the placement with Baosteel would give it "significantly greater capacity to accelerate (its) steel raw materials asset portfolio.
"This is an important step in executing Aquila's vision to become one of Australia's leading globally diversified steel raw materials producers," the company said.
Aquila is a minerals explorer focussing on coal and iron ore in Australia and overseas.
Aquila also produces coal from its Isaac Plains Project in the Bowen Basin, in central Queensland.
Aquila said the Baosteel deal would underwrite the delivery of key projects in iron ore, metallurgical coal and manganese.
Projects include West Pilbara in WA and Thabazimbi, in South Africa (both iron ore), three coal projects at Isaac Plains, Eagle Downs and Washpool, in Queensland, and the Avontuur manganese project, also in South Africa.
The deal will deliver "significant new supplies of iron ore, coking coal and manganese" to Baosteel.
"The involvement of Baosteel now paves the way for Aquila to pursue its strategic vision in drawing together supply through its interests in the West Pilbara Iron Ore Project and shipping through the planned Anketell Port," Aquila said.
"Aquila and Baosteel will work towards establishing a joint sales arrangement to assist in the distribution of the Company's, and potentially Baosteel's share of production, from these key projects throughout the Peoples Republic of China.
"Aquila and Baosteel have also agreed to work towards the establishment of long-term raw material off-take arrangements from these projects, once they are developed and in production."
Source: WA Today
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