JOHANNESBURG (miningweekly.com) – ASX-listed Territory Resources has reached an agreement to sell its stake in fellow-listed India Resources.

The sale of the 8,5% interest, which was one of the final remaining investments from its previous diversification strategy, was consistent with Territory’s strategy of focusing on its core iron-ore operations in Australia.

The deal would involve the sale of Territory’s more than 19-million shares in India at A$0,024 a share, raising a total of A$456 456, and the transfer of a A$1,5-million inter-company loan previously provided to India by Territory, for a total cash settlement of A$1,956-million.

The agreement was conditional on India Resources’ shareholders approval as well as approval by Territory’s third-party financier, Noble Group. As part of its debt management, Territory has agreed that all proceeds received under the transaction would be paid to Noble to reduce the company’s debt to Noble.

Upon satisfaction of the conditions, payment for the transfer of the A$1,5-million loan would occur in four tranches over the next two to five months with an initial payment of A$750 000, to be received upon completion of the share transfer, followed by three further monthly payments of A$250 000.

Territory Resources MD Andy Haslam said that this agreement represented the next logical step to reduce debt following the progress the company had achieved in recent weeks with the consolidation and extension of its debt arrangements with Noble and the reinstatement of its shares to trading on the ASX.

“The past year has not been without its challenges, but we believe that we are now in a solid position and that we will be able to consolidate this during the 2010 financial year,” he added.

Territory recently delivered an unaudited net profit after tax of almost A$6,3-million for the September 2009 quarter, driven by increased iron-ore production and a reduction in operating costs at the company’s Frances Creek iron-ore mine.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.