Cape Lambert signs MOU for Namesake project

Australian iron ore exploration and development company, Cape Lambert Iron Ore Limited has signed an MoU with Chinese conglomerate, China Metallurgical Group Corporation (MCC), for the sale of the Company’s namesake iron ore project located in the Pilbara region of Western Australia .

Under the terms of the MoU, MCC has secured an exclusive right (until 30 April 2008) to conduct due diligence for the acquisition of the Project.
MCC has paid a deposit of A$10 million, with A$5 million of this being non-refundable if MCC withdraws. The entire deposit will be offset from the sale consideration when MCC complete the acquisition of the Project.

The key terms of the proposed sale have largely been agreed. MCC will purchase the Company’s entire Project land package (Exploration Licenses 47/1462, 47/1271, 47/1248 and 47/1233), other than Exploration License Application 47/1493, for a total consideration of A$400 million. The consideration will be paid in three tranches; A$240 million or 60% at settlement, A$80 million or 20% sixty (60) days after settlement and A$80 million or 20% on the grant of a mining lease.

Importantly, the Company will receive 80% of the sale consideration, or A$320 million, within 60 days of settlement.

MCC has total assets of approximately US$20 billion (145 billion Yuan) and in 2007 the revenue and total profit of the group totalled approximately US$18 billion (126 billion Yuan) and US$1 billion (7.2 billion Yuan) respectively. It has completed design and construction assignments for approximately two thirds of the iron ore projects in China and undertaken design and construction work for more than 90% of the steel mills in China. Its stated objective is to become a Fortune 500 company by 2010.

In Australia, MCC owns 20% of Citic Pacific Mining’s A$5.2 billion Sino Iron Project, located near Cape Preston, approximately 120km south west of the Cape Lambert iron ore project. MCC has also been awarded the EPC construction contract at the Sino Iron Project.

Cape Lambert Chairman Ian Burston said, our commitment has at all times focussed on the development of what we believe is a world-class iron ore project at Cape Lambert. However, this opportunity has the potential to deliver significant upfront value to shareholders and it was therefore incumbent on us to look at it.