PERTH (miningweekly.com) – Iron-ore developer Flinders Mines on Monday announced that it had inked an option agreement with New Zealand’s Todd Corporation to divest of its Pilbara Iron Ore project for A$65-million.

Flinders would receive A$10-million up-front in consideration for the transaction, and a further A$55-million if Todd exercised its options to acquire the Pilbara Iron Ore project.

The exercise period would extend until the end of December next year, during which time Todd would have exclusive rights over the project, including the right to undertake exploration and feasibility work. The option period could be extended for a further two periods, of two years each.

Shareholder Todd had also agreed to a production royalty over the Pilbara Iron Ore project, ranging from 60c/t to A$1.40/t on a straight line basis between iron-ore prices of $60/t and $80/t, with a minimum royalty of 60c/t payable below this range.

If Todd has not started construction at the Pilbara Iron Ore project within two years of the date of sale, Flinders would receive a further A$20-million cash payments. The future royalties on the project would also not be affected by this cash payment.

Flinders MD Ian Gordon said that the sale of the Pilbara Iron Ore project was in the best interest of shareholders, considering the significant downturn in iron-ore prices, which adversely affected Flinders’ ability to raise the required capital to fund the Pilbara Iron Ore project, and to generate economic returns.

Gordon said that the company had investigated all options available for the project, in order to maximise shareholder value, and believed that transferring ownership of the project to Todd represented the most efficient method of adding value to shareholders.

He pointed out that Todd had the balance sheet strength that would give the development of the Pilbara Iron Ore project the best possible chance of success.

The project was expected to require a capital investment of some A$726-million to be developed into a 25-million-tonne-a-year operation.

The transaction with Todd was subject to a number of conditions, including shareholder approval.