Vale (BVMF:VALE3) will be funding up to US$120 million ($185.95 million) in development activities for Cyclone Metals’ (ASX:CLE) Iron Bear Project in Canada, following signing a memorandum of understanding.
The MoU is non-binding and both companies aim to finalise the agreement within 90 days.
Vale is among the world’s largest iron ore and iron ore pellets producers, with an annual output exceeding 300 million tonnes. The company has operations in Brazil and Canada.
Under the two-phased MoU, both companies aim to advance the Iron Bear Project to a decision to mine.
As part of phase one, Vale will contribute US$18 million to conduct a preliminary Feasibility Study, mineral resource drilling, and environmental baseline studies.
Phase one will be completed once all the full contributions have been received to Cyclone or once the work programs are largely completed.
Cyclone Metals, which has a market capitalisation of $13.2 million, says once phase one is completed, Vale may elect to begin phase two and form a corporate joint venture — resulting in earning a 30% interest in the project.
Vale’s ownership in the JV will increase to 75% once the project has been taken to a decision to mine or once its total contribution has reached US$120 million.
During the second phase, both companies will hold two of five board seats on the project’s governing board, with an independent Chairman to be agreed upon. Once Vale earns a 75% interest, Vale will nominate a majority of directors on the governing board.
Once the decision to mine has been achieved, Vale will have the right to acquire Cyclone’s remaining 25% interest at a fair market value, subject to Cyclone shareholders’ approval.
Cyclone Metals CEO Paul Berend says Vale is an ideal partner for Cyclone Metals, due to its extensive operational and financial resources that supports realising Iron Bear’s full potential.
“Vale is a powerhouse for the production of ultra clean iron ore products which includes DR pellets and their proprietary cold briquettes,” Berend says.
The Iron Bear Project, covering 7,275 hectares, has a mineral resource of 16.6 billion tonnes at 29.3% iron. The project is located near the Provincial border of Newfoundland and Labrador and Québec, Canada.
Cyclone Metals is an iron ore developer focused on its assets in the Labrador trough in Canada.
Write to Aaliyah Rogan at Mining.com.au
Images: Cyclone Metals
