PERTH (miningweekly.com) – TSX-V and ASX-listed diversified junior Ascot Resources has signed a multimillion-dollar deal with Ochre Group Holdings to acquire the Wonmunna iron-ore project, in the Pilbara, which has the potential to produce five-million tonnes a year of lump and fine products.

The proposed acquisition presented a diversification of the company’s current asset portfolio from both a geographic and mineral resource perspective, while remaining consistent with a strategy to develop projects that have the potential to deliver steelmaking raw materials in the near term, the company reported on Monday.

Up until now, the company’s main focus has been on exploring for gold, silver and copper in North America.

Under the terms of the agreement, Ascot would issue Ochre with 88-million fully paid ordinary shares, along with an initial cash consideration of A$2-million. A further A$29.75-million would be payable within five years of the transaction completion date, with an interest rate of 5.88% payable on the additional consideration.

A 1% gross revenue royalty would also be payable to Ochre on all products produced and sold within 12 months after Ascot completed the first product shipments from Wonmunna.

In addition, Ascot would assume Ochre’s obligation to ASX-listed Talisman Mining to pay a 1% gross revenue royalty beginning from the first shipment.

The Wonmunna project comprises four direct shipping ore deposits, and was reported to host a resource of some 84.3-milion tonnes, at an average grade of 56.5% iron, with 64% of the resource estimate classified as indicated.

Extensive resource, environmental, heritage, groundwater and scoping studies have been completed over the project, which Ascot said provided a solid foundation for future planned mine development.

Ochre executive chairperson Nathan Featherby said on Tuesday that the company’s sale of the Wonmunna asset was a unique opportunity to maximise the value of the asset, under difficult market conditions, adding that the structure of the transaction allowed Ochre to benefit from any upside in Ascot.

“The acquisition frees up Ochre from any ongoing liability in respect to the maintenance of the Wonmunna tenements and allows the board to focus on other value adding transactions, with the full knowledge and confidence that a competent and experienced team will be in charge of developing the Wonmuna project into a near-term producing asset.”

Following the completion of the transaction, Ascot would focus on accelerating the project development to ensure key milestones were delivered.

Meanwhile, Ascot would look to raise some A$10-million in new equity, at a price of 25c a share, while its largest shareholder, Resource Capital Fund, has indicated that it would make a further A$5-million investment in the company by subscribing for new shares at an issue price of 25c each.

The successful capital raising was a condition of the sales agreement, shareholder approval and a final due diligence of the Wonmunna project.