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Red Hill Iron Limited (RHI) was formed in 2005 with the
purpose of acquiring and evaluating its extensive
tenement holdings that cover much of the western margin
of the Hamersley Province of the West Pilbara region of
Western Australia. It raised $4 million on public
listing in February 2006.
The issued capital of RHI is now 49,405,037 fully paid
shares with no options or partly paid shares.
RHI has made substantial progress with its plans to
become a diversified producer from channel iron deposits
(CID) located in the Robe River region of the West
Pilbara. The Company's primary asset is a 40% interest
in the Red Hill Iron Ore Joint Venture (RHIOJV) that is
subject to reduction (see below). This joint venture
provides the great majority of the CID reserves which
are the subject of the API managed West Pilbara Iron Ore
Project Stage One development. A mining operation of 30
million tonnes per year is planned based on proven and
probable reserves of 445 million tonnes with port and
rail link to market and first production anticipated by
the end of 2014.
Currently, a portion of the RHIOJV proven and probable
reserves earmarked for the Stage One development are the
subject of a dispute between RHI and API. RHI is also
in dispute with API as to whether or not the
facilities required to produce ore from the project and
link the mining operations to market (including the
building of a new port should API participate in its
development) are assets of the RHIOJV.
In January 2010, RHI completed the purchase of the
Pannawonica CID Project which is situated to the north
of the RHIOJV. The 150 square kilometre project area
secures two CID mesa systems with a combined strike
length of over 14 kilometres. RHI has drilled out some
70 million tonnes of inferred resources grading 54.1%
iron and 4.8% alumina at Pannawonica which is somewhat
inferior to current CID market specifications but should
provide future value to the Company.
THE RED HILL IRON ORE JOINT VENTURE AGREEMENT
API Management Pty Ltd (API) holds a 60% interest and
acts as manager. API is equally owned by subsidiaries of
Aquila Resources Limited and AMCI Inc. Under the joint
venture arrangements, API is responsible for all Project
funding until the first delivery of product to
customers. At that stage it will have earned an
additional 20% interest in the joint venture.
RHI will then hold a 20% interest and will be required
to repay its 20% share of the costs incurred by API in
earning its additional 20% interest (together with
interest accrued at Libor plus 2.5%) out of 80% of RHI's
share of any future project net cash flow. Up to the
point of first product delivery
RHI has the right to elect to exchange its project
interest for a 2% FOB royalty over total project
production which would cancel the requirement to repay
debt.
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