Advanced Explorations soars 30% on new partnership with XinXing Pipes
Advanced Explorations (TSX-V:AXI) has formed a partnership with iron and steel company XinXing Pipes Group (XXP) to develop the company's Roche Bay iron ore project in Nunavut, it said Monday.
Advanced Explorations signed the agreement with XinXing's subsidiary, Xinxing Ductile Iron Pipes (XDIP), one of the world's largest producers of cast iron pipe, and its affiliate China Huaxin International Trade (HIT), which will see XDIP and HIT aquire 19% of Advanced Exploration's stock at a price of $0.25 per share, valued at approximately $5.3 million.
The deal sets out principles for further direct investment into Advanced Explorations and for the establishment of a joint venture in order to complete a definitive feasibility study for the company's Roche Bay project.
Under the terms, XDIP will earn a 50% direct interest in a newly formed joint venture entity, to be called the Roche Bay JV, in exchange for XDIP providing $20 million to the Roche Bay JV to complete the feasibility study and a further $30 million of working capital upon completion of the study. XDIP has agreed to provide the necessary financing and development capital for Advanced Explorations' Roche Bay project to a maximum of $1 billion.
In addition, Advanced Explorations has promised to provide XDIP with 50% off-take from all iron products once the Roche Bay project begins production.
"A significant equity position in AEI has been obtained in the context of the current depressed venture markets while providing clear framework to achieve production, and that could lead to other joint development opportunities," said president and CEO John Gingerich.
"The exploration strengths of our team in collaboration with the development skills and financial resources of XXP can also be leveraged beyond the Melville Peninsula, Nunavut opportunities," he continued.
The current agreement does not include Advanced Explorations' Tuktu project, but it could form part of future negotiations, it said. The company has stated that it has received third party interest for the Tuktu project and discussions are ongoing.
The Toronto-based company, which was up more than 30% to $0.3 as of 1:45pm ET on Monday, is focused on developing iron ore opportunities and has interests in projects in Nunavut with low infrastructure needs. The Roche Bay magnetite project is located on the coast and is bolstered by a deep water access to its eastern coast.
XXP is a state-owned enterprise in China and has its main business in iron and steel, military clothing supply, heavy machinery engineering, real estate investments and others. Currently, the company has subsidiaries in 24 provinces throughout China, Mongolia and India with over 80,000 employees.
XinXing Ductile Iron Pipe's 2010 target production is approximately six million tons of steel and cast iron pipes.
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