Ivanhoe Mines is to sell its Savage River open cast iron ore mine in Australia to a subsidiary of London, England-based Stemcor Holdings, a provider of specialist services to the steel industry.
The purchase price consists of two initial payments worth $21.5 million, plus a series of contingent, escalating-scale annual payments based on the annual Nibrasco/JSM (Japanese Steel Mills) price of iron ore pellets.
The payments system, to be made over five years, beginning March 2006, could raise the total amount paid to Ivanhoe to $170 million, depending upon how the price of iron rises.
In recent years, fuelled by strong demand for iron ore pellets from Chinese, Japanese, Korean and European steel mills, international pellet prices have risen sharply, increasing by approximately 10% in 2003 and a further 19% in 2004.
Ivanhoe’s decision to sell the Savage River Mine is said to be part of the company’s plan to rationalise its non-core assets as it focuses on the accelerated shaft sinking and underground development of the Hugo deposit at the company’s Oyu Tolgoi copper and gold project in Mongolia.
The closing of the transaction is subject to regulatory approvals. The parties expect to close the transaction on, or before, February 28, 2005.