CZR Resources strikes $102m deal for Robe Mesa iron ore project
CZR Resources (ASX: CZR) is set to gain new financial flexibility after signing a deal to sell its majority interest in the Robe Mesa iron ore project in Western Australia to a subsidiary of China’s Shenzhen Naao Jianglan Investment Company (SNIC).
The $102 million CZR will receive from the sale of its wholly-owned subsidiary Zanthus Resources is considered a significant return for a company with a market cap of $47m at the time the binding share sale agreement with Miracle Iron Resources was made.
CZR managing director Stefan Murphy said the all-cash offer will see the company receive 80% of the cash consideration on completion of the transaction and the remaining 20% on the earlier of first shipment or 30 June 2025.
“This sale will unlock substantial value for CZR shareholders with a cash transaction in a very timely fashion,” Mr Murphy said.
“The sale price reflects not only the value we have created at Robe Mesa but also the significant potential of the project, ensuring CZR shareholders get appropriate value for the project.”
“The transaction will also remove CZR’s funding and development risks associated with the project while delivering CZR a very substantial cash balance.”
Mr Murphy highlighted the fact that CZR will retain its Croydon gold project, along strike from De Grey Mining’s (ASX: DEG) multi-million ounce Hemi gold discovery, along with the Buddadoo vanadium-titanium project in WA.
Board support
The transaction still requires shareholder approval – which will be sought early in 2024 – and other conditions including Australian Foreign Investment Review Board and Chinese government approvals.
The CZR board has already announced it unanimously recommends that the company’s shareholders support the transaction.
CZR has revealed that it has been informed by the ASX that the company’s major shareholder Mark Creasy and his associated entities will likely be ineligible to vote on the transaction due to Mr Creasy being in discussions to sell his 15% minority interest in the project to Miracle Iron.
Strong Chinese backing
Based in Perth, Miracle is closely linked with its parent company SNIC, itself a subsidiary of Xinjiang Jiangna Mining Corporation (XJMC).
XJMC is one of the largest producers of titanium metal in China and a major hub for the production of iron ore as a by-product of its downstream titanium processing business.
It has provided a parent company guarantee to guarantee all of Miracle Iron’s obligations under the agreement.
Robust results
In October 2023, CZR released the results of a definitive feasibility study of the Robe Mesa project identifying exceptional financial returns with low costs and strong free cash flow.
The base case life-of-mine free cash flow was estimated at $419m, with a net present value of $256m.
The study suggested that financial returns could rise to $1.3 billion free cash flow at current iron ore prices, with a 62% base case internal rate of return rising to 159% at current iron ore prices.
The company also reported updated ore reserves, with an increase from 8.2 million tonnes to 33.4Mt, while production rates were increased from 2Mtpa to between 3.5 and 5 Mtpa.