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Petmin ups stake in North American iron-ore project

20th June 2014

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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JSE-listed Petmin plans to raise its stake in North Atlantic Iron Corporation (NAIC) to 40% and then exchange its equity in NAIC for a similar stake in a related company that would be listed in Toronto and Johannesburg.

Petmin, which has steadily invested R210-million in NAIC since 2011, will invest a further $6-million in the emerging Canada-based merchant pig iron producer, following a positive pre-economic assessment.

NAIC, which showed an aftertax investment rate of return of up to 19.3%, aims to produce 810 000 t/y of merchant pig iron from iron-ore sands from its deposit in Goose Bay, Newfoundland, or 915 000 t/y using fines bought from iron-ore producers, for sale primarily in North America, with Europe as a secondary market.

The overall project capital expenditure has been estimated at $515-million for the fines case, while the operating expenditure has been estimated at $305/t of merchant pig iron, which would make NAIC one of the lowest-cost producers on a delivered basis in North America.

Petmin points out that NAIC’s competitors’ costs for merchant pig iron range from $375/t to $425/t.

Petmin, which has an option to acquire a further 9.9% interest in NAIC, also plans to exchange its 40% equity in the pig iron producer, valued at about R300-million, for a 40% stake in Muskrat Minerals Incorporated (MMI).

MMI is listed on the Canadian National Stock Exchange and currently holds 40% of Grand River Iron Sand, which would own 60% of NAIC once Petmin has made its final investment by the end of 2014.

Following the conclusion of the deal, MMI will list on a major Canadian stock exchange, along with a secondary listing on the JSE.

Petmin will distribute the MMI shares to Petmin shareholders through a special dividend with an estimated value of 50c a share.

The transaction will be completed once NAIC has sufficient capital to complete a $20-million bankable feasibility study.

Edited by Creamer Media Reporter

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