EXPLORER Murchison Metals will sell its 50 per cent stake in the troubled Oakajee Port and Rail project (OPR) and Crosslands Resources to Japan-based Mitsubishi Development for $325 million, giving the Japanese company sole ownership of both assets.
Currently, Mitsubishi and Murchison each own 50 per cent of OPR and Crosslands. The agreement remains subject to regulatory and shareholder approvals, including the go-ahead from the Foreign Investment Review Board (FIRB).
Murchison managing director Greg Martin said the company would make a recommendation to the FIRB for the purchase to go ahead.
“From Murchison’s point of view, this is clearly a deal that would remove uncertainty over the development of the Mid West region,” Mr Martin added.
The deal was also conditional on the resolution of Murchison’s ongoing federal court battle with gold explorer Chameleon Mining by December 23, 2011.
“We anticipate that Chameleon will enter into commercial negotiations with [Murchison] regarding a potential settlement in the coming weeks,” Chameleon reported in a statement to shareholders on November 25, 2011. Mitsubishi is not the first party to approach Murchison regarding its interest in Crosslands and OPR.
In a late November ASX announcement, Murchison said it remained open to superior proposals, but that Mitsubishi’s simple and clear all-cash offer was in the best interest of its shareholders.
“We have been engaged over the last five months with a number of parties in our strategic review,” Mr Martin said. “We’ve obviously been talking with a number of parties about a range of options and outcomes, this is one that’s come forward, it’s a firm all-cash offer, the board is unanimous in believing it’s valuable to put this to the shareholders,” he said.
In March 2009, Murchison, Mitsubishi and the WA Government signed an agreement for the development of a deepwater port at Oakajee and an integrated rail network to service iron ore miners and port users in the Mid West.
The project was expected to cost $3 billion, but that price increased to $5.43 billion following the completion of a feasibility study in July 2011, prompting Murchison to place its share of OPR on the market. As of November 2011, the project’s development costs had blown out to nearly $6 billion.
WA premier Colin Barnett – who has been an enthusiastic supporter of the OPR project – said the projected capital cost was too high. The WA and Federal Governments have agreed to pay a total of $670 million to help fund the project.
According to the Chamber of Minerals and Energy of WA, there are about $10 billion worth of projects planned for the Mid West, many of which will need to utilise large scale transport facilities such as the OPR. “This is an incredibly valuable proposition to get up and running,” WA Chamber of Minerals and Energy director Damian Callachor said.
“The economic benefit that investments of that size and the ongoing operations of those projects provides not only a valuable benefit to the state but also to the national economy in terms of jobs, income tax, GST, and all the rest of it,” he said. Meanwhile, Gindalbie Metals chairman George Jones told media visiting the company’s Karara project that he welcomed the news of the deal.
“It’s good for the Mid West, it’s good for Mitsubishi, it’s good for Murchison shareholders and it’s good for everybody else,” Mr Jones said. Iron ore miner Gindalbie is one of the proposed foundation customers for OPR and needs Oakajee for its long-term plans of shipping 30 million tonnes from Karara.
By Kate Christou