The first phase of a bankable feasibility study (BFS) into triple-listed iron-ore explorer Ferrum Crescent’s Moonlight iron-ore project, in Limpopo, will start in the fourth quarter.

This follows the signing of a farm-in and joint venture agree-ment with Business Venture Investments (BVI) No 1709, which will fund the BFS in return for an up to 43% equity interest in the project’s holding company, Ferrum Iron Ore (FIO).

The agreement effectively ter-minates a previous memoran-dum of understanding between Ferrum and Principle Monarch Investments, which would have acquired a 39% interest in FIO in return for funding the BFS.

“It has been a very long road in extremely difficult market conditions but, finally, we have a fully committed and binding agreement in place for completion of the Moonlight project BFS,” Ferrum MD Tom Revy points out.

The first phase will focus on updating and completing a study on the best short-term business case model, based on technical, financial and committed domestic offtake details.

The study is expected to be completed within 12 months, and will see BVI earn an initial 14% equity interest in FIO.

Ferrum will, however, be entitled to contribute R8.3-million to the Phase 1 BFS costs to reduce BVI’s equity interest to 10%.

The second phase, to be carried out over 24 months, will see the completion of a study on the best short-term case defined during the first phase of the BFS.

The second phase will include all matters required by inter-national project and equity financiers, including certain detailed deliverables agreed with Ferrum Crescent.

On satisfactory completion, BVI will earn a further 29% equity interest in FIO, thereby equating to a potential interest of up to 43%.

Under the terms of the farm-in agreement, BVI will appoint the manager of the BFS, as long as the appointee is an internationally reputable engineering firm capable of managing the conduct and completion of the stipulated farm-in programme.

BVI and FIO will also form a management committee to establish and give direction to a team charged with the day-to-day management of the BFS studies.

FIO will retain the right to negotiate and conclude term sheets for the engineering, pro-curement and construction (EPC) contract from an engineer- ing consulting firm to be recom-mended by BVI; negotiate an EPC management contract with Aurecon for project infrastruc- ture; appoint an infrastructure financier when required in the future; and negotiate an EPC contract for the construction of a pelletising plant.