Strike intends to use a part of the sale proceeds to fully repay its $7.2m loan borrowed from Good Importing International (GII) and will use the remaining proceeds to advance its Apurimac Iron Ore Project in Peru and for working capital purposes
Strike to sell Paulsens East iron ore project to Miracle Iron. (Credit: Artyom Korshunov on Unsplash)
Australian iron ore company Strike Resources has agreed to sell its Paulsens East Iron Ore project in the Pilbara, Western Australia, to Miracle Iron Holdings for A$20.5m ($14m) in cash.
Under the terms of the agreement, Strike will divest all the shares of its fully owned subsidiary Strike Iron Ore Holding (SIOPL), which indirectly owns the Paulsens East Iron Ore Project.
Strike will receive a total consideration of A$20.5m, comprising an A$20m upfront payment upon closing and A$0.5m as deferred consideration from Miracle, payable on 30 June 2024.
The transaction is expected to be completed in February 2024, subject to approval by the Strike shareholders at an upcoming general meeting, along with other conditions precedent.
Strike intends to use a part of the sale proceeds to fully repay its $7.2m loan borrowed from Good Importing International (GII).
The Australian mining company will use the remaining proceeds to advance its Apurimac Iron Ore Project in Peru and for working capital purposes.
In addition, GII has agreed to terminate its marketing agency and offtake arrangements for Apurimac and Paulsens East, subject to Strike transferring a 20% interest in Apurimac Ferrum, the owner of Apurimac, to JE United, and Miracle paying A$2m to GII at closing.
Miracle also seeks cancellation of the Orion Royalty that is payable to CXM for iron ore produced from Paulsens East in exchange for a $2m consideration to CXM.
Strike said the sale of Paulsens East will present strategic benefits, including a significant cash consideration to discharge the GII Loan and quarterly interest payment obligations.
The mining company may not require alternative methods for meeting its obligations under the GII Loan, including the further sale of shares it holds in Lithium Energy or a capital raising.
Furthermore, the improved working capital position will support the potential resumption of direct-shipping iron ore (DSO) mining operations at Apurimac, said Strike.