Ivanhoe Mines agrees to sell Australian iron mine
February 07 2005 - 7:30AM
PR Newswire (US)
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.
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