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LONDON (Alliance News) - Anglesey Mining PLC Thursday said it has made an agreement giving it the right to acquire a controlling interest in the Grangesberg Iron project in Sweden from Roslagen Resources AB, a Swedish private company.
In a statement, Anglesey said it has initially bought a 6% stake in private Swedish company Grangesberg Iron AB, which was founded in 2007 with the target of re-opening the historic iron ore mine in Grangesberg. Anglesey said it also has the option to acquire a further 51% of the enlarged share capital of Grangesberg, which it will pay in the form of shares.
Anglesey said it has paid USD145,000 for the 6% stake and would spend a total of USD1.75 million in shares for the additional 51%.
During the 12-month term of that option, Anglesey will hold management control and operatorship of Grangesberg, and will appoint three out of five directors to its board, including the chairman.
The remaining 43% stake is still held by Roslagen Resources, which will appoint two directors to the board and provide local executive management.
"Grangesberg is a mine with a rich historical heritage and an exciting future potential," Chief Executive Bill Hooley said in a statement. "Anglesey believes that there is an opportunity to re-open the Grangesberg mine to provide a local source of high quality iron ore, well known to the European steel industry. The agreements announced today give Anglesey the opportunity to evaluate Grangesberg, both technically at the mine level in the Grangesberg area and commercially throughout the Swedish and European steel industry, with the right to acquire control of the Grangesberg project on attractive terms," Hooley added.
Speaking to Alliance News, Hooley said financial difficulties encountered by Roslagen gave it the opportunity to make a move for the project, adding that he sees it as very much a European story.
"I suspect it will take five to six years before we can get it into production. We'll be looking at the iron ore price from that point, and will be assessing what the European market for iron ore will be as opposed to the Chinese market," Hooley said.
"We'll talk to the European iron mills who currently tend to buy most of their product from Brazil, and I'm sure they'd appreciate a second source," the CEO added.
Grangesberg Iron has of late completed a financial and capital restructuring with Anglesey's assistance. Grangesberg Iron holds a 25-year exploitation permit covering the previously mined Grangesberg underground mining operations granted by the Swedish Mining Inspectorate in May 2013.
The Grangesberg iron ore mine, located in the Bergslagen district of central Sweden, was the third-largest iron ore mine in the country until it was closed in 1989, according to Anglesey, which added that prior indications are that at least 115 million tonnes of iron ore containing
around 40% iron remain for exploitation at Grangesberg.
"It is expected that following the normal environmental permitting processes and engineering design and financing, a conventional underground bulk mining operation followed by processing using standard technology can produce some 2.0 to 2.5 million tonnes per year of saleable iron ore concentrate for the European, Middle East and Asian steel markets," Anglesey Mining said in a statement.
As part of the agreements and reorganisation, a USD3.5 million loan due to Cypriot company KII Holdings Ltd has been renegotiated and is now due by the end of 2016.
To facilitate the deal, UK private company Eurang Ltd has agreed to invest USD1.75 million, with USD1.25 million of that going into Grangesberg for the 51% controlling interest. That cash will be used to move the project towards production and for working capital.
According to Anglesey, this has been carried out through a new wholly owned special purpose Swedish company, Eurmag AB over which, during the term of the option, Anglesey will hold management and control rights. The additional USD500,000 will be used to cover transaction costs and expenses and some outstanding liabilities. When Anglesey exercises its option to buy the controlling stake, it will acquire all the shares in Eurang by issuing shares valued at USD1.75 million. This will increase its direct stake in the company to 57%.
Grangesberg will have about USD5.0 million in debt, while Eurang will have about USD4.5 million in debt. Anglesey said that if it doesn't exercise its option over the controlling stake after its evaluating and assessing the acquisition target, it will give up its board seats and management direction and control. This would happen at the end of the 12-month option period, but Anglesey said it would continue to hold the initial 6% stake. Anglesey wants to evaluate the viability of putting the Grangesberg iron ore mine back into commercial production.
"In parallel with these activities the ongoing background environmental studies and permit applications will be progressed. Anglesey will also carry out detailed marketing studies on both the Swedish and the greater European markets for Grangesberg iron ore products," Anglesey said in a statement.
"In the subsequent periods, following the exercise of the option and subject to successful financing, it is expected that a definitive feasibility study will be undertaken, including mine definition drilling, process test-work and detailed engineering design and costing," Anglesey said.
Anglesey Mining shares were Thursday quoted at 4.01 pence, up 15%.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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