Aurox Resources has entered into a heads of agreement with Chengde Iron & Steel Group and China Metallurgical Group Corp (MCC). The agreement outlines the principles for a joint venture in relation to the Balla Balla vanadium and iron ore projects, located in the Pilbara region, Western Australia, in addition to proposed share placement, convertible note terms and product offtake arrangements.
Pursuant to the terms of the agreement, the parties intend to negotiate formal agreements for execution by the end of September which will be subject to a number of proposed conditions. In April 2005 Aurox entered into the Balla Balla option agreement whereby it gained the right to undertake a bankable feasibility study (BFS) for the mining and production of vanadium-pentoxide and ferrovanadium. Under the terms of the Balla Balla option agreement, Aurox may acquire the project from the vendors for $15 million to acquire a 100% equity interest in the project and effect transfer of the tenements following completion of the BFS.
The 16 km Balla Balla titanomagnetite horizon currently hosts a JORC compliant resource of 303 Mt grading 0.65% V2O5, 43% Fe and 13% Ti. The horizon includes the vanadium project, which is the focus of a BFS for the mining and production of ferrovanadium and vanadium pentoxide over the next 30 years. The BFS is scheduled for completion at the end of September. The iron ore project includes 11 km of titanomagnetite located beyond the BFS limits where further drilling and a subsequent feasibility study for the production of iron ore concentrate are proposed to be carried out.
Under the agreement, Chengde/MCC will farm into the Balla Balla vanadium and iron ore projects via cash payments of A$20 million following completion pursuant to the Balla Balla option agreement. Chengde/MCC will also provide funding of A$33.6 million by way of a convertible note and a share placement. The agreement also provides for Chengde/MCC to purchase by way of proposed offtake arrangements 70% of the Balla Balla ferro vanadium production and a minimum of 2 Mt/y of titanomagnetite iron ore concentrate for the life of the vanadium and iron ore projects respectively.
