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Ivanhoe Mines agrees to sell Australian iron mine
Company to focus on development of Mongolian assets
SINGAPORE, Feb. 7 /PRNewswire-FirstCall/ -- Ivanhoe Mines' Chief Financial
Officer Peter Meredith announced today that the company has entered into a
definitive agreement to sell 100% of the Savage River iron ore mine in
Australia to a subsidiary of Stemcor Holdings Limited, of London, England.
The purchase price consists of two initial payments totalling US$21.5 million,
plus a series of contingent, escalating-scale annual payments based on the
annual Nibrasco/JSM (Japanese Steel Mills) pellet price. The escalating-scale
payments, to be made over five years, beginning March, 2006, could increase the
total consideration paid to Ivanhoe to US$170 million.
For example, if the Nibrasco/JSM pellet-price settlements average US$50 a tonne
this year, Ivanhoe will receive initial payments totalling approximately US$33
million over the next 14 months. The additional payments to Ivanhoe over the
subsequent four years would amount to US$43 million if the Nibrasco/JSM pellet
price remains at US$50 a tonne during this period. This would make the total
payment to Ivanhoe approximately US$76 million.
Determination of the contingent, escalating-scale annual payments to Ivanhoe
will be based on Savage River iron-ore pellet sales of 1.8 million tonnes per
year for the next five years and an escalating pellet-price formula using the
annual Nibrasco/JSM pellet price as the pricing benchmark. The payments will be
made between April, 2005, and March, 2010, and calculated at an initial rate of
US$1.00 a tonne if the annual benchmark price exceeds US$30 a tonne, and will
escalate to a maximum of US$16.50 a tonne if annual pellet prices exceed US$80
a tonne.
The current Nibrasco/JSM price is US$38.10 a tonne. However, the chronic
shortage of iron ore combined with continued strong worldwide demand for iron
ore products has created expectations of significantly higher international
pellet-price settlements in 2005. International pellet prices are negotiated
annually in March/April between the major iron ore producers and consumers in
Europe and Asia. According to recent media reports, several of the world's
largest iron ore pellet producers have requested price increases of between 50%
and 90%. If a 50% increase is achieved, such a settlement would elevate the
Nibrasco/JSM pellet price to approximately US$57 a tonne. If a 90% increase is
achieved, the Nibrasco/JSM pellet price would rise to approximately US$72 a
tonne.
Fuelled by strong demand for iron ore pellets from Chinese, Japanese, Korean
and European steel mills, international pellet prices have risen sharply in
recent years, increasing approximately 10% in 2003 and a further 19% in 2004.
If Nibrasco/JSM pellet price settlements average US$40 a tonne over the
five-year period, the additional payments to Ivanhoe would amount to US$18
million, making total consideration for the sale US$39.5 million. If the
average price is US$60 a tonne over the five-year period, the additional
payments to Ivanhoe would amount to US$85.5 million, making total consideration
for the sale US$107 million. If the average price is US$70 a tonne over the
five-year period, the additional payments to Ivanhoe would amount to US$117
million, making total consideration for the sale US$138.5 million.
ABM Mining, a wholly-owned subsidiary of Ivanhoe Mines, has been producing iron
ore pellets and concentrate at its integrated Savage River Mine, consisting of
mining, pelletizing and shipping facilities in the state of Tasmania, since
1997. ABM holds the Savage River Mine through its indirect subsidiary,
Goldamere Pty. Ltd. Pellet production from the mine in 2004 was approximately
2.1 million tonnes.
The Stemcor Group operates as a global provider of specialist services to the
steel industry, in areas such as raw material supply, finished product
marketing, logistics and trade finance.
The closing of the transaction is subject to regulatory approvals. The parties
expect to close the transaction on, or before, February 28, 2005.
Ivanhoe's decision to sell the Savage River Mine is part of the company's plan
to rationalize its non-core assets as it focuses on the accelerated shaft
sinking and underground development of the world-class Hugo deposit at the
company's Oyu Tolgoi copper and gold project in Mongolia. Ivanhoe has a 100%
interest in the Oyu Tolgoi project and owns or controls exploration rights
covering approximately 118,000 square kilometres in Mongolia, where additional
copper, gold and coal discoveries are being delineated. Ivanhoe produces LME
grade A copper from its Monywa joint venture in Myanmar.
Ivanhoe's shares are listed on the New York, Toronto and Australian stock
exchanges under the symbol IVN.
Information contacts: Investors: Bill Trenaman / Media: Bob Williamson
+1.604.688.5755
FORWARD-LOOKING STATEMENTS: This document includes forward-looking statements
regarding Ivanhoe Mines, and its subsidiaries, business and project plans.
Forward-looking statements include, but are not limited to, statements
concerning expected future payments to Ivanhoe and future Nibrasco/JSM pellet
prices. When used in this document, the words such as "could," "plan,"
"estimate," "expect," "intend," "may," "potential," "should," and similar
expressions are forward-looking statements. Although Ivanhoe Mines believes
that its expectations reflected in these forward-looking statements are
reasonable, such statements involve risks and uncertainties and no assurance
can be given that actual results will be consistent with these forward-looking
statements. Important factors that could cause actual results to differ from
these forward-looking statements are disclosed under the heading "Risk Factors"
and elsewhere in the corporation's periodic filings with Canadian, US and
Australian securities regulators.
DATASOURCE: Ivanhoe Mines Ltd.
CONTACT: Investors: Bill Trenaman; Media: Bob Williamson,
(604) 688-5755;
To request a free copy of this organization's annual report, please go to
http://www.newswire.ca/ and click on reports@cnw.