PERTH (miningweekly.com) – ASX-listed junior Equatorial Resources has entered into a conditional sales agreement with a subsidiary of European commodities trader Interalloys Trading to divest of its Mayoko-Moussondji iron project, in the Republic of Congo.

Interalloys subsidiary Midus Global would acquire the project for A$5-million in cash, as well as a 2% royalty over all iron-ore produced and sold at the Mayoko-Moussondji operation.

Midus has already paid a A$500 000 deposit, which would be deducted from the purchase price at the completion of the transaction.

A further A$300 000 would be withheld from the purchase price and would be used by Midus to cover any outstanding liabilities over the project, with the excess to be returned to Equatorial.

Equatorial MD John Welborn said on Friday that the sale of Mayoko-Moussondji was a positive outcome for all stakeholders.

“Interalloys is the right strategic partner for Mayoko-Moussondji. They have the skills, capacity and motivation to advance the project into production. The retention of a 2% royalty over all future production will allow Equatorial shareholders to remain a beneficiary of Interalloys' success and has the potential to generate significant value if and when future production increases as a result of any recovery in iron-ore prices.”

Welborn noted that the transaction would ensure that, notwithstanding the difficult economic climate for iron-ore projects, Mayoko-Moussondji capitalised on its competitive advantage of product quality and infrastructure availability and captured a first-mover advantage in the regional iron-ore industry.

The Mayoko-Moussondji project was expected to produce 2.5-million tonnes a year, over an initial eight-and-a-half-year mine life. The mine would require a capital injection of about $181.16-million and would have an operating cost of $39.93/t.

In December 2014, Equatorial had signed a mining convention agreement, which defined the fiscal rights and legal obligations of both the Congo government and Equatorial in respect to the Mayoko-Moussondji project.

The company has also secured a 25-year mining licence over the project.