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(Alliance News) - Cadence Minerals PLC said Wednesday it has entered into a binding settlement agreement with the secured bank creditors of Dev Mineracao SA, the owner of the Amapa iron ore project in Brazil.
Shares in the London-based investor in mineral resources were 36% higher in London on Wednesday morning at 26.50 pence each.
The agreement is the last major precondition for Cadence to vest its initial USD2.5 million for 20% of the large-scale Amapa iron ore mine, beneficiation plant, railway and private port.
As a result, Cadence and Indo Sino's joint venture have now secured 100% ownership of Amapa. Cadence has already begun work on the next investment phase to earn an additional 7% of Amapa for USD3.5 million.
Chief Executive Kiran Morzaria said the deal represents its "greatest achievement to date as a mining investment company".
The original credit facility provided to Dev Mineracao had a principle amount outstanding of USD135 million. The agreement settles all of the principle amount plus all interest, default interest, outstanding costs and fees, Cadence said. The new facility is secured over all of Dev Mineracao's equity and assets.
The agreement will see the total principle amounts owed to the creditors reduced to USD103 million from about USD231 million. This will be paid over two years and will come from the net profits from the sale of Dev Mineracao's iron ore stockpiles.
"We have already embarked on Phase 2, where Cadence will vest an additional USD3.5 million to take our holding to 27%. Given the rate of progress that I saw on visiting Amapa in October, I have every confidence that the day when our newly recommissioned mine re-commences production will come, at which point the nascent value in the project will be realised for the benefit of all our investors and shareholders," Morzaria added.
Non-Executive Chair Andrew Suckling said: "The opportunity is simply huge. Amapa was once owned Anglo American PLC, and we fully intend to restore the mine and infrastructure to its former glory, and more besides given that we intend to produce a higher quality product mix. Even now, the value of this transaction is only starting to register with the markets, something I truly believe will change dramatically in the coming years."
Anglo impaired the asset in its 2012 accounts to USD462 million, holding a 70% stake in the mine at the time.
By Paul McGowan; paulmcgowan@alliancenews.com
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