Another update on Australasian Resources

Primer on my investment outlook

Australasian shares, which have been locked in a trading halt since December 14, are set to resume trading on the Australian bourse after the company yesterday said Shougang entities would invest $A56 million into Australasian through a share and option subscription agreement, with attaching options to raise a further $42 million on exercise.

Chinese state-owned Shougang will also provide total funding for the Balmoral South project, estimated at $US2.1 billion ($A2.6 billion) and will purchase all of the iron ore products from the project.

Shougang will hold a 12.8% stake in Australasian after subscribing for 56 million Australasian shares at $1.

Australasian managing director Darren Hedley said the placement had been made as part of a strategic alliance between the Shougang group and Australasian.

"There is a clear business case why this match has every reason to be very lucrative for all parties," he said.

"When a company with the reputation, iron ore know-how and asset backing as Shougang has, injects $56 million into the company, including an option for a further $42 million at a premium price, it sends a clear message to the investing public that this asset and the company is going places."

Australasian's Balmoral South project comprises rights to mine 1 billion tonnes of magnetite iron ore from part of the Susan Palmer deposit within the larger Balmoral deposits.

The current proposed development plan involves the production and export of 5 million tonnes per annum of iron ore concentrate, 5Mtpa of iron ore pellets and approximately 1.5Mtpa of hot briquetted iron.

The company has already delineated a mineral resource at Balmoral in excess of 1.1Bt and announced a JORC-compliant 346Mt ore reserve estimate.

Shougang entities will also have the right to appoint two members to the board of Australasian's subsidiary International Minerals while Australasian will appoint four members to the board.

Shougang, through its entities, imports over 20Mt of iron ore into China for use in their steelmaking facilities.

The Chinese steelmaker is currently in the process of developing a substantial new integrated steelmaking facility on a site at Tangshan on the northern coast of China with production of 10Mt of steel a year commencing 2010.

Last year, Australasian announced a deal with Clive Palmer's Mineralogy over the Balmoral South magnetite project, which delivered Palmer around 80% of Australasia's issued capital.

MiningNews.net was unable to speak to a representative at Australasian prior to publication.

Update on Australasian Resources

Primer on my investment outlook

Iron ore hopeful Australasian Resources Ltd appears to have secured a major breakthrough on its plans to develop its giant Pilbara iron ore project after negotiating a funding deal with Chinese steel giant Shougang Corporation.

Shougang will invest $56 million into Australasian and has also agreed to fund the US$2.1 billion (A$2.6 billion) cost of its Balmoral South iron ore project by providing an interest-free loan.

Australasian said the interest-free loan will be repayable only out of set percentages of the project's free cash flow.

Shougang, which has a 19 per cent stake in Mid West iron ore producer Mount Gibson Iron, will emerge with a 12.8 per cent stake in Australasian after subscribing for 56 million shares at $1 each.

It will also receive 28 million free attaching options which, if exercised, would pump an additional $42 million into Australasian's coffers.

Queensland mining identity Clive Palmer emerged with a 77 per cent stake in Australasian last year after agreeing to sell the company the rights to mine part of his massive deposits.

The deal followed Mr Palmer's $US285 million transaction with Hong Kong group CITIC Pacific, which bought the rights to mine one billion tonnes of ore at nearby Balmoral.

CITIC is due to pay another $US200 million to earn the rights to mine another one billion tonnes in July.

Shares in Australasian, formerly Sherlock Bay Nickel, have been locked in a trading halt since December 14 pending a financing deal for the South Balmoral project.

Australasian revealed today that entities related to Shougang will have the right to appoint two members to the board of Australasian's wholly owned subsidiary International Minerals while Australasian will appoint four members to the board.

IM holds the interests in the iron ore project.

Australasian said that it would spend up to 15 months undertaking studies on the project, including developing a construction proposal.

A problem of liquidity

Primer on my investment outlook

Just something that I have thinking of for the past few days. Everywhere liquidity seems to be drying up. A stock I owned, just a small percent of my holdings is defaulting on its convertibles. Another mining company has been suspended from trading as it has no working capital recently. It looks like the risk aversion that characterized the last boom is going away. I am personally looking for an exit for most of my risky positions.
Lets see how this plays out. Just get the feeling that this crash will be sudden and unexpected.