Minerals explorer Havilah Resources (ASX: HAV) has announced it will receive a “transformational” cash injection of up to $100 million from OneSteel Manufacturing Pty Ltd to fully-fund its work programs in the Mutooroo copper-cobalt district of South Australia’s Curnamona Craton.
OneSteel (trading as SIMEC Mining) is a member of mining and energy giant GFG Alliance headed by international businessman Sanjeev Gupta.
The group already has a major investment in South Australia via the Whyalla Steelworks and Whyalla port and export facility, and is well-positioned to provide Havilah with access to global capital markets and technical and commercial support.
The funding arrangement will establish a strategic partnership between Havilah and GFG and provides a clear pathway to potential commercialisation of the Maldorky, Grants and Grants Basin iron ore assets as well as a nearby project consisting of the Mutooroo deposit and neighbouring copper prospects.
The scale of Havilah’s iron ore assets alone is significant, backed by an initial exploration target announced last month at Grants Basin of up to 3.79 billion tonnes at between 23.9% to 27.6% iron.
The deal with Havilah is set to be a win-win, amid speculation that it may also give GFG the feedstock it needs for its visionary Nex-Gen steel plant in Whyalla, touted as the “largest and most efficient steel plant built outside of China in recent years” with the ability and infrastructure to double its capacity.
The plant will focus on the production of semi-finished steel exported to downstream operations in key strategic and growing markets around the world.
In December, Mr Gupta announced plans for the “mega” plant and said he had signed contracts worth more than $600 million as part of the greater Whyalla transformation project.
The Havilah transaction will consist of a staged equity investment in the exploration company totalling $50 million, plus a further $50 million in conditional or discretionary funding.
Funds will be applied via agreed work programs to advance the company’s projects to the completion of definitive feasibility studies over an anticipated three-year period.
There may also be provision for exploration, corporate and administration costs.
If all equity placements are made, the deal could give GFG a 51% stake in Havilah.
Subsequent to the equity placements, GFG will have the potential to acquire direct equity interests in Maldorky, Grants and Grants Basin.
Havilah non-executive chairman Mark Stewart said the funding proposal is the culmination of “extensive discussions and technical co-operation” with SIMEC and GFG which commenced last year.
“This co-operative approach demonstrates a shared view of the inherent value of Havilah and its potential, combined with GFG’s confidence in the long-term growth prospects inherent in our extensive tenement package,” he said.
“Importantly, [the funding] provides access to capital which will allow [us] to confidently advance two of our key projects to definitive feasibility milestones within the next three years, and it opens the door to international capital markets and commercial support which would otherwise not be available.”
At mid-afternoon, shares in Havilah Resources were down 24.44% to $0.170.