ASX-listed Ferrum Crescent, the direct reduction-grade pellet project developer, has entered into a joint venture agreement to complete its bankable feasibility study (BFS) for its Moonlight iron ore project in Limpopo.
The legally binding and farm-in agreement with Business Venture Investments No. 1709 (BVI) is through its subsidiary Ferrum Iron Ore (FIO) and its parent intermediate holding company, Ferrum South Africa (FSA).
BVI is a sister company of South African BEE investment house Ovation Capital. The comprehensive farm-in agreement with BVI provides for the completion of all requisite BFS work streams to produce a full BFS on the project to a fixed timeline – to be fully funded by BVI in return for up to a 43% equity interest in the project’s holding company, FIO.
The previous memorandum of understanding with Principle Monarchy Investments (PMI) has been formally terminated which entailed providing financing for the BFS for up to 39%.
The first phase of BFS work (BFS Phase 1) is scheduled to commence during Q4, 2015.
Tom Revy, MD of Ferrum Crescent, says: “It has been a very long road in extremely difficult market conditions but finally we now have a fully committed and binding agreement in place for completion of the Moonlight Project BFS. I look forward to working with our new partners, BVI, on the development of the project.”
A closer look at the BFS plan
During the last six months, the company has investigated a number of scenarios with respect to various potential smaller scale start up options, including the potential development of a concentrate-only producing project.
This initial review work has concluded that as well as potentially significant capital cost savings, there are also possible development time benefits and seemingly sufficient local demand for a high quality concentrate product.
- BFS Phase 1
Focused on updating and completing a full +/-25% (capital and operating costs) study on the best short term business case (concentrate) model. This model will be based upon technical, financial and committed domestic off-take details.
BVI will be responsible for completing this study within 12 months. Upon satisfactory completion of BFS Phase 1, BVI will be entitled to receive 14% equity in FIO. Ferrum Crescent will, however, be entitled (but not obligated) to elect to contribute R8.3 million to reduce the equity interest for BVI to 10%.
Should BVI not complete BFS Phase 1, it will not earn any interest in FIO.
- BFS Phase 2
Following satisfactory completion of BFS Phase 1, BVI will then be afforded a total of 24 months in which to complete a full +/- 15% (capital and operating costs) study on the best short term business case defined during the abovementioned BFS Phase 1 process.
BFS Phase 2 will be carried out to a standard, and include, all matters required by international project and equity financiers, including without limitation certain detailed deliverables agreed with Ferrum Crescent.
Upon satisfactory completion of BFS Phase 2, BVI will earn a further 29% equity interest in FIO, thereby taking its total potential interest to up to 43% of the Project.
Should BVI not complete BFS Phase 2, it will have earned no further equity in FIO apart from that earned as a result of completing BFS Phase 1.