Cyclone Metals (ASX:CLE) has signed a binding commercial agreement with global mining company Vale (BVMF:VALE3) regarding the development of the Iron Bear Project in Canada.
Under the agreement, Vale has the right to earn up to 75% interest in the project by providing up to US$138 million ($217.1 million) of funding to the project in two phases.
If Vale elects to proceed to a decision to mine, the company can then choose to acquire the remaining 25% of the project at a fair market value, or carry Cyclone Metals to production with no dilution.
As part of the first-phase, Vale will contribute US$18 million to fund the phase-one program which includes a Preliminary Feasibility Study, resource drilling, and environmental baseline studies.
Once completed, Vale can begin the second phase, at which time both companies will form a joint venture to develop the project. This will give Vale a 30% interest in the project.
Vale will then fund the joint venture’s development activities up to US$120 million. These activities will include a Bankable Feasibility Study, environmental impact studies, establishing impact benefit agreements with First Nations, and general de-risking work.
Cyclone Metals, which has a market capitalisation of $62 million, says the project has secured a clear pathway to production and to becoming a supplier of low-cost and ultra-low carbon iron ore products.
CEO Paul Berend says Vale dominated the rapidly growing market for low carbon and direct reduction iron ore products, therefore is considered an ideal partner and future operator for Iron Bear.
The Iron Bear Project, covering 7,275 hectares, has potential to access cheap renewable energy from the Menihek hydro-plant. The project is also located within 25km of an open access heavy haul railway which is directly connected to the Sept Isles and Pointe Noire iron ore export ports.
These two factors improve the prospects for eventual economic extraction of the Iron Bear mineral resource.
Cyclone Metals is a mineral explorer and developer primarily focused on the development of its Iron Bear Project in the Labrador Trough, Canada.
Write to Aaliyah Rogan at Mining.com.au
Images: Cyclone Metals
