Cazaly Resources (ASX:CAZ) is seeking to offload its Parker Range iron ore project in the Yilgarn region of Western Australia to a private Australian iron ore development group for more than $13 million plus royalties.
Gold Valley Iron is running the ruler over Cazaly’s wholly-owned subsidiary which hold the Parker Range tenements, Cazaly Iron Pty Ltd.
For an initial three-month exclusivity period, Gold Valley will pay $350,000 upfront via a $50,000 exclusivity fee and strategic placement investment in Cazaly of 10 million shares at 3c per share.
An initial $5 million will be paid on the signing of formal agreements and a further $8 million once production has begun. Gold Valley is liable to pay Cazaly $500,000 per annum as a holding cost prior to production up to a maximum of $8 million with any holding cost payments to reduce the second production payment.
In addition, a royalty ranging from A$0.50 to A$1.00 per tonne is payable to Cazaly on all ore produced from the Project.
Funds raised from the proposed sale will be used for ongoing exploration work on the Company’s current projects and for new project generation.
The sale follows a comprehensive process over an extended period whereby the Company dealt with several parties interested in the Project.
Cazaly’s Joint Managing Director Nathan McMahon said the Gold Valley deal was considered the best option to advance the Parker Range Project towards production whilst retaining a potential royalty stream.
This agreement realises some immediate value from the Parker Range Project in an iron ore market that has recently shown signs of recovery,” he said.
Following completion of the proposed transaction, the Company will receive a significant cash injection and provide shareholders further upside by way of additional payments and a royalty from production.
“We are highly confident that the project will grow further and are confident Gold Valley has the requisite technical, managerial and importantly, marketing skills to develop the asset.”
The deal is conditional on Cazaly obtaining shareholder approval for the entry into and completion of the transaction and Gold Valley being satisfied with its due diligence investigations in respect of the Project and Cazaly Iron.
Shares in Cazaly were trading at 2.6c on Tuesday.