Legend Mining sells Cameroon iron project to India's Jindal Steel
West African focused Legend Mining (ASX: LEG) will sell its Ngovayang iron ore project in Cameroon to India's Jindal Steel and Power for A$17.5 million in cash.
Jindal Steel and Power (BOM:532286) is one of India's major steel producers with a significant presence in sectors like mining, power generation and infrastructure.
Legend’s managing director, Mark Wilson said, "the absence of direct shipping ore at the Project coupled with the current state of global financial markets has put the further development of the Project beyond the reach of an exploration company."
Wilson said the deal will allow Legend to pursue other opportunities, given the $17.5 million from the sale as well as cash + liquids of $9.8 million will provide a handy war chest for acquisitions.
Market sentiment towards companies developing West African iron ore projects had also played a part, he said in the decision to sell as share prices of Legend’s ASX-listed peer group who are developing West African iron ore projects have declined by 68% over the past 24 months.
The deal also shows the determination of Asian steel conglomerates to gain a foothold in Africa to take a long view to tapping alternative supplies of iron ore as alternatives to Pilbara producers.
Legend has for some time been seeking a buyer, or a partner to assist it in progressing the Project and began discussions with Jindal early in 2013.
Legend will receive cash consideration of:
- Initial A$12.0 million upon completion of the Transaction; and
- A$5.5 million within 10 business days of the execution of a Mining Convention between Jindal and the Government of Cameroon.
Completion of the transaction is subject to a number of conditions, including Legend shareholder approval.
Use of proceeds
Legend said it is possible to acquire exploration and/or mining projects in a range of commodities at attractive valuations.
The directors’ present intention is to utilise the proceeds of the disposal, along with its existing cash reserves and liquid investments, to review a range of new opportunities and, if one can be identified that the Directors believe will increase shareholder value, potentially make such an acquisition.
After the payment of the initial A$12.0 million upon completion of the deal, when combined with cash + liquids, provides a war-chest for Legend's Mark Wilson to go shopping, leveraging attractive valuations in the minerals sector.
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