Upstart minerals explorer Cazaly Resources (ASX: CAZ) has seen its shares skyrocket as high as 96 percent this morning on the back of an upgraded offer for its Parker Range iron ore assets.
The Chris Ellison led Mineral Resources has proposed a deal which would see Cazaly reap $20 million in cash, plus a $0.50/ tonne royalty for iron ore produced from the tenements, following the first 10 million tonnes of production.
The unsolicited offer trumps an existing proposal from would-be suitor Gold Valley, a privately-operated minerals company.
Cazaly has terminated an exclusivity period with Gold Valley, which has offered a total cash consideration of $13 million consisting of an initial payment of $5 million and $8 million once production commences, plus a royalty fee.
The agreement with Gold Valley remains in place while Cazaly weighs up the Mineral Resources proposal and Gold Valley will be entitled to a $250,000 break fee should the initial deal be quashed.
Cazaly has said the company will now work with Mineral Resources to develop a more comprehensive agreement within 30 days.
The Parker Range project lies in the Yilgarn region of Western Australia, approximately 85km from Mineral Resources’ Koolyanobbing iron ore operation.
Koolyanobbing is operating at an annualised run rate of 6Mtpa of iron ore production, with plans to increase production to 7.5Mtpa by Q1 FY20.
Parker Range hosts a reserve of 31.4Mt of iron ore grading 56.4% Fe.
Cazaly has completed an upgraded definitive feasibility study on the project which estimated that initial capital costs to establish an operation could be reduced by 23% to $130 million, with potential for further cost cutting.
Operating costs were also reduced to an estimated $48.85 per tonne.
The offloading of Parker Range has occurred while Cazaly has also entered an agreement for the sale of an 80% interest in its Mt Venn gold project in the north eastern Goldfields of Western Australia.
