Diatreme Resources looks to China for investment in Cyclone zircon project
Queensland-based Diatreme Resources (ASX:DRX) took a leap forward today signing an agreement that would see funding from China for its Cyclone zircon rich heavy minerals sands project in Western Australia.
An MOU has been signed with BaoTi Group Ltd, based in Shaanxi Province, central China which would entail, after due diligence, BaoTi taking an equity investment in DRX and jointly developing the Cyclone Project, through a joint venture vehicle in which BaoTi can earn a significant direct stake in the Project.
The MOU is subject to approvals from the central Chinese government(s) and/or the Australian Foreign Investment Review Board.
Following agreement between the parties, the terms and conditions would be incorporated into a Heads of Agreement, including earn-in provisions, management of the joint venture, the location of a Mineral Separation Plant and any product offtake entitlements.
Both DRX and BaoTi have agreed to negotiate and sign the HOA within three (3) months of the MOU.
Diatreme’s executive chairman, Mr Tony Fawdon said, “The signing of this MOU confirms a highly positive approach by BaoTi toward the ultimate feasibility and development of the Cyclone Deposit in Western Australia, in conjunction with Diatreme."
He said, "BaoTi’s commitment, as a highly respected Chinese end user and exporter of heavy mineral products, is a sign that the zircon rich deposit would be open to the injection of investment funds on a scale beyond what may likely be achieved under current market circumstances through traditional debt and equity means."
Earlier this year, Diatreme released the results of a scoping study on the Cyclone deposit which showed positive results for a 9 million tonnes per annum operation producing 280,000 tonnes of concentrate.
The study showed that there was the potential to generate $50 million annual average profit for 10 years. Projected capital expenditure totals $311 million. With the positive results Diatreme launched pre-feasibility studies with the aim of developing Cyclone into a profitable mining operation by 2014.
Pre-feasibility studies have commenced, with target for commencement of project construction in 2012.
There is plenty of upside for the JV in the emerging world class Eucla Basin heavy mineral sands province, along with 30,000km2 of underexplored ground prospective for heavy mineral sands.
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