CuFe looks forward to working closely with the Newcam team to finalise the transaction. Pic: Getty Images
CUF sells iron ore rights for $12m as it looks to begin drilling future facing metals
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- CuFe sells JWD iron ore rights to Newcam Minerals
- CuFe and Newcam have agreed the JWD mine will move to suspend operations while the ownership transition occurs
- CUF says the transaction will simplify the company’s business
Special report: CuFe has entered into a binding agreement to sell its iron ore rights at the JWD iron ore mine in WA’s Mid West to Newcam Minerals for $12m.
With iron ore prices remaining volatile and current price levels below CuFe’s (ASX:CUF) breakeven cost, the company has made the decision to focus its attention on those assets which offer greater potential for value creation.
Iron ore prices have fallen over the past few weeks, with 62% Fe cargoes dropping below the US$100/t threshold in August – the lowest in 20 months as lossmaking Chinese steel mills cut output.
CUF has entered into a binding term sheet for the disposal of 100% of its rights, title and interest in the iron ore at the JWD mine to Newcam Minerals for $12m cash including a $500,000 deposit and $11.5m payable on completion of the transaction.
JWD ‘best run as a private business’
CUF’s JWD iron ore project, 800km from Geraldton, increased production rates last year after a stable year of operations in 2023 but the asset’s major challenge has always been its distance from port.
According to CUF executive director Mike Hancock, the distance makes the mine an inherently higher cost producer with haulage costs comprising more than 50% of the mines C1 cost.
“We have seen other iron producers in the region who have long road haul components expand their business into the haulage space to lower this cost,” Hancock said.
“For CuFe we don’t believe it’s the right step to take given the scale of JWD and the upfront capital cost associated with such a change.
“We could suspend the mine as we have done before and wait for the market to improve but this consumes cash to ramp down and ramp up and having had the experience of operating it for more than three years, we consider the scale of JWD means it is best run as a private business that is very flexible as to how and when the mine operates.”
Instead, CuFe has made the decision to monetise the asset now and fund exploration for other commodities.
Deal terms
WFE, a 100% owned subsidiary of CUF, owns 100% of the rights, title and interest in the assets including the rights to extract iron ore from the JWD deposit located near Wiluna in WA and has agreed to sell those rights to Newcam for $12 million cash.
Sale proceeds will primarily be used to settle trade creditors, which remain the responsibility of WFE.
WFE retains rights to certain inventory on hand at the date of signing, existing hedges and debtors and is responsible for costs incurred up until completion, certain of which will be reimbursed by Newcam post completion.
CUF and Newcam have agreed the JWD mine will move to suspend operations while the ownership transition occurs given the current challenging conditions in the iron ore market, to preserve the value of ore in the ground.
The transaction will simplify CUF’s business by removing the cash flow volatility associated with operating an iron ore mine and remove exposure to losses being incurred at current prices.
This will allow the company to use its funds to progress exploration on a suite of future facing metals across its project portfolio which includes Tennant Creek, Yarram, North Dam, West Arunta and Tamborough.
What’s next?
The disposal of the JWD mining right will be subject to the approval of CuFe shareholders.
Preparation of a notice of meeting is underway, with the meeting to be scheduled as soon as possible – likely early October 2024.
The mine will be transitioned into care and maintenance while that occurs to preserve cash and resource in the ground during the interim period.
Drilling at North Dam
Meanwhile, CuFe has finalised arrangements to mobilise equipment for reverse circulation drilling at the North Dam project, just 29km from Mineral Resources’ Mt Marion mine.
Exploration at CuFe’s (ASX:CUF) North Dam tenement, south-east of Coolgardie, has uncovered a host of future facing metals such as lithium, niobium, tantalum and rare earths which will be tested with the drill bit in the upcoming program.
Experienced drilling contractor Challenge Drilling has been appointed to undertake the campaign, comprising 2,500m of RC drilling following a final pre-clearance and monitoring survey undertaken by the Marlinyu Ghoorlie Traditional Owner Group in late July.
The equipment and team are planned to mobilise to site this week, and the current program is estimated to be completed over a two-week period.
Positive on long-term demand for critical minerals
“We are excited and eager to commence the program at North Dam with the exploration to date defining potential for Li2O, Nb and Rare Earths,” Hancock said.
“The relatively wide spaced drilling allows our geology team to better understand the regional geology and focus on priority target areas of anomalous mineralisation.
“We remain positive on the longer-term demand for critical minerals and this program is an important step to defining the potential of the North Dam project.
“Local winter rainfall has resulted in some delays, but we thank the Marlinyu Ghoorlie Traditional Owner Group for their ongoing support and are pleased to have engaged local indigenous earthworks contractors and to be supporting the wider Kalgoorlie community”.
Drilling results earmarked for October
To date, North Dam exploration results have generated multiple exciting targets that will be drill tested across 5 target areas.
Recently, a rock chip sampling program unearthed high-grade niobium (47.1%) and tantalum (9.01%), which boast characteristics coincident with multiple outcropping pegmatites within the central area of the licence.
CUF says these results will be followed up alongside the testing of LCT pegmatite trends which were supported by recent soil surveys and geochemical analysis.
Results will be analysed with assay results expected to be received during October 2024 pending lab turnaround times.
This article was developed in collaboration with CuFe, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
