PERTH (miningweekly.com) – Metals developer Centrex has signed a memorandum of understanding with its joint venture (JV) partner Wuhan Iron & Steel (Wisco) to delay the development of the Fusion iron-ore project, in line with the changing market conditions.

Instead, the JV partners would start an exploration programme at new deposits within the Fusion tenement to allow greater mining selectivity and to reduce the estimated mine production costs.

The results from the exploration programme would then be incorporated into a new prefeasibility study (PFS) on the Fusion project, which would likely be undertaken in the next 12 to 24 months, Centrex said.

The JV parties would look to contribute a further A$10-million to the project kitty, on top of the existing A$9-million, to fund the completion of this new PFS.

Centrex told shareholders on Monday that one of the major goals in negotiating amendments to the Fusion JV was to allow the company to find a funding solution through to the end of a bankable feasibility study (BFS), which was distinct from the company’s own current cash reserves.

Once the PFS has been completed, Wisco and Centrex would look at two funding options for the project, one of which was incorporating and listing the JV vehicle on the ASX for an initial public offer, to raise the funds required for a BFS.

A second option would see the JV partners working to introduce a third-party investor to provide the funding for the BFS, with Centrex saying that its share in the project would be diluted to around 30%.

As part of this new funding path, Centrex would also relinquish its entitlement to any resource incentive payments under the original JV agreement, which represented four potential tranches of A$27-million each, should the JV's inferred resource reach 1.25-billion tonnes, 1.5-billion tonnes, 1.75-billion tonnes and 2-billion tonnes respectively.

Centrex told shareholders that, given the uncertainty over triggering the resource incentive payments, with the JV still some ways from reaching the first milestone mark and land access constrained in the area, the company was of the opinion that the BFS was of a higher priority.

To date, the project has an established mineral resource of some 680-million tonnes, representing some 14 km of the overall magnetic trend.

The JV partners would now start exploring additional deposits within the project area to reduce the required mining depths for the initial mine life, in order to lower the estimated production costs and to increase the project returns by creating greater investment certainty.