The stage is set for the country's largest iron ore miner NMDC to pick up 50 per cent stake in Australian exploration company Legacy Iron Ore for nearly A$19 million (approximately Rs 92 crore), which will mark its first overseas acquisition.
The board of Legacy has approved the NMDC offer, and proposes to put this placement at its next shareholders meeting in November.
Cash injection
In a filing to the Australian Stock Exchange, Legacy said: “The A$18.9 million will be for a minimum allocation of about 238 million shares, with the final number of shares to be issued and the deemed subscription price being subject to the total shares on issue at the time the two companies execute the formal agreement.”
The Legacy Board considered the NMDC proposal beneficial on the ground that there will be “substantial cash injection, which will ensure Legacy's ongoing funding obligations under its various joint venture agreements will be met.”
Further, the deal will provide access to new acquisition opportunities and give Legacy the opportunity to be NMDC's preferred vehicle in Australia, as part of its global expansion.
“For NMDC this is only the initial investment. Future investments will depend on project requirement,” a senior NMDC official said.
The Indian miner had in June also concluded a non-binding MoU with another Australian firm, Minemakers Ltd, to establish a roadmap for its participation in development of Wonarah phosphate deposits.
Following the cash injection, Legacy plans to consider a spin-off of certain assets into a new entity, which will also be listed on ASX. The NMDC deal and the proposed restructure mark a significant step for Legacy to turn into a mining entity from an exploration company.
“NMDC is not only providing Legacy with funding through the placement, but their presence on the register will create additional opportunities for Legacy, such as the acquisition and divestment of various projects,” Ms Sharon Heng, Legacy's CEO, said.
Legacy has four major projects, with two focussed on iron ore and two on gold, with all of them located in Western Australia. An independent study has pegged the valuation of the different projects of Legacy at between A$83 million and A$142 million.