Wrap Text
BFS Farm-In Agreement Concluded with BVI/Ovation Capital
FERRUM CRESCENT LIMITED
(Incorporated and registered in Australia and registered as an external company in the Republic of
South Africa)
(Registration number A.C.N. 097 532 137)
(External company registration number 2011/116305/10)
Share code on the ASX: FCR
Share code on AIM: FCR
Share code on the JSE: FCR
ISIN: AU000000WRL8
14 October 2015
Ferrum Crescent Limited
("Ferrum Crescent", the "Company" or the "Group")(ASX: FCR, AIM: FCR, JSE: FCR)
BFS Farm-In Agreement Concluded with BVI/Ovation Capital
Highlights:
- Following extensive negotiations, Ferrum Crescent, through its subsidiary Ferrum Iron Ore
(Proprietary) Limited (“FIO”) and its parent intermediate holding company, Ferrum South
Africa (Proprietary) Limited (“FSA”), has entered into a legally binding farm-in and joint
venture agreement (the “Farm-in Agreement”) with Business Venture Investments No. 1709
(Proprietary) Limited (“BVI”) to form a joint venture for the completion of the bankable
feasibility study (“BFS”) for the Moonlight Iron Project in Limpopo Province, northern South
Africa (the “Project”)
- The previously announced memorandum of understanding with Principle Monarchy
Investments (Proprietary) Limited (“PMI”) has been formally terminated
- BVI is a sister company of South African BEE investment house Ovation Capital
- Comprehensive Farm-in Agreement with BVI provides for the completion of all requisite BFS
workstreams to produce a full BFS on the Project to a fixed timeline - to be fully funded by BVI
in return for up to a 43% equity interest in the Project’s holding company, FIO
- Clear mechanisms and milestones (as described below) for earn-in and supervision of BFS
activities across two phases: BFS Phase 1 and BFS Phase 2
- Full legally binding Farm-in Agreement in place - BFS Phase 1 work scheduled to commence
during Q4 2015
- Farm-in Agreement provides for full information sharing to satisfy Ferrum Crescent’s
regulatory obligations and disclosure requirements
Commenting today Tom Revy, Managing Director of Ferrum Crescent, said:
“It has been a very long road in extremely difficult market conditions but finally we now have a fully
committed and binding agreement in place for completion of the Moonlight Project BFS. I look forward
to working with our new partners, BVI, on the development of the Project. Restarting of the BFS
Phase 1 activities should commence by the end of 2015 and I look forward to reporting on a regular
basis as to the status of the Project as the various planned key BFS milestones are progressed.”
Ferrum Crescent, the ASX, AIM and JSE quoted iron ore developer announces that its subsidiary,
Ferrum Iron Ore (Proprietary) Limited (“FIO”), and its parent intermediate holding company, Ferrum
South Africa (Proprietary) Limited (“FSA”), have entered into a farm-in and joint venture agreement
(the “Farm-in Agreement”) with Business Venture Investments No. 1709 (Proprietary) Limited (“BVI”)
in South Africa for the completion of the bankable feasibility study (“BFS”) at the group’s Moonlight
Iron Project located in Limpopo Province, northern South Africa (the “Project”). BVI is a sister
company of South African BEE investment house Ovation Capital. BFS Phase 1 work anticipated to
commence during Q4 2015.
The previously announced memorandum of understanding with Principle Monarchy Investments
(Proprietary) Limited (“PMI”) to provide financing for the BFS for up to 39% of FIO has been formally
terminated with no scheduled payments having been received from PMI.
Principal Terms of the Farm-in Agreement and Development Obligations
During the last 6 months, the Company has investigated a number of scenarios with respect to
various potential smaller scale start up options, including the potential development of a concentrate-
only producing project. This initial review work has concluded that as well as potentially significant
capital cost savings, there are also possible development time benefits and seemingly sufficient local
demand for a high quality concentrate product.
Accordingly, the BFS will now be undertaken in two phases:
BFS Phase 1
Focused on updating and completing a full +/-25% (capital and operating costs) study on the best
short term business case (concentrate) model. This model will be based upon technical, financial and
committed domestic offtake details. BVI will be responsible for completing this study within 12 months.
Upon satisfactory completion of BFS Phase 1, BVI will be entitled to receive 14% equity in FIO.
Ferrum Crescent will, however, be entitled (but not obligated) to elect to contribute R8.3m to reduce
the equity interest for BVI to 10%. Should BVI not complete BFS Phase 1, it will not earn any interest
in FIO.
BFS Phase 2
Following satisfactory completion of BFS Phase 1, BVI will then be afforded a total of 24 months in
which to complete a full +/- 15% (capital and operating costs) study on the best short term business
case defined during the abovementioned BFS Phase 1 process. BFS Phase 2 will be carried out to a
standard, and include, all matters required by international project and equity financiers, including
without limitation certain detailed deliverables agreed with Ferrum Crescent. Upon satisfactory
completion of BFS Phase 2, BVI will earn a further 29% equity interest in FIO, thereby taking its total
potential interest to up to 43% of the Project. Should BVI not complete BFS Phase 2, it will have
earned no further equity in FIO apart from that earned as a result of completing BFS Phase 1.
A shareholders’ agreement is intended to be entered into and become effective on completion of BFS
Phase 1.
Management and Oversight Structure of BFS
Under the terms of the Farm-in Agreement, BVI may appoint the manager of the BFS, provided that
BVI can demonstrate to FIO’s reasonable satisfaction that the firm (the “Manager”) being appointed is
an internationally reputable engineering firm capable of managing the conduct and completion of the
stipulated farm-in programme to a standard that is reasonably acceptable and typically expected by
third party financiers in order for the BFS to be bankable. BVI must ensure that the Manager
complies with pre-agreed provisions relating to operational standards and competency. It is
specifically acknowledged and agreed between the parties that BVI must enter into all contracts with
the Manager and its associates for the purposes of the farm-in programme on a principal to principal
basis.
As part of the Farm-in Agreement, BVI and FIO will form a management committee (the “Management
Committee”). The primary function of the Management Committee is to establish and give directions
to a team to be charged with the day to day management and direction of the Manager in the conduct
of the BFS and with carrying out certain functions that are necessary for the completion by the
Manager of both BFS Phase 1 and 2. Each of FIO and BVI are entitled to appoint two representatives
to the Management Committee.
Mr Ed Aylmer, currently Ferrum Crescent’s Study Manager, will immediately be involved in the
management of both phases of the BFS, whilst Mr Scott Huntly, currently Ferrum Crescent’s
Government and Community Relations Manager, will also be involved from the commencement of
BFS Phase 2. All costs attributable to their contributions to the BFS activities will be borne by BVI.
Project Execution
It has been agreed by both BVI and Ferrum Crescent, as a key condition of the Farm-in Agreement,
that as part of the execution of the Project, FIO will have the right to negotiate, in good faith, and
conclude term sheets for the following:
(a) an engineering, procurement and construction (“EPC”) contract in respect of the mine
establishment from an engineering consulting firm to be recommended by BVI;
(b) an engineering, procurement and construction management (“EPCM”) contract with Aurecon in
respect of certain of the requisite Project infrastructure;
(c) an infrastructure financier in respect of the potential slurry pipeline subject to the conclusion of a
pipeline usage contract between FIO and such infrastructure financier that is financially attractive
to FIO; and
(d) if and when required in the future, an EPC contract in respect of the pelletising plant contract
from an engineering consulting firm to be recommended by BVI.
The parties will evaluate the results of the full BFS before making any decision to proceed to enter
into any legally binding contracts in respect of the potential future construction phase of the Project.
Further information on Ovation Capital
Ovation Capital is a niche boutique investment management firm which has been operational since
November 2012 and is currently seeking to deploy venture capital towards early stage market
opportunities.
Ovation Capital’s principal long term focus is to become a specialist investment management
company, aimed at creating structured investment products for developmental finance institutions,
institutional and high net worth investors. Ovation Capital aims to deliver consistently above average
returns to the investor in each of such selected investment products. Ovation Capital also provides
the following services across different industries:
• Investment Advisory & Structuring: Venture Capital, Private Equity & Corporate Finance
• Deal Sourcing
• Capital Raising
• Investment Management & Reporting
Ovation Capital identifies and holds its mining and mineral beneficiation opportunities through BVI and
both Ovation Capital and BVI are controlled by Mr Yonela Ngcai who is the founding member and
director of Ovation Capital..
Ovation Capital has invested and been involved in the development of a number of mineral
beneficiation projects in South Africa, including:
• A Silicomanganese project
• An underground coal gasification & downstream beneficiation project commencing with a
50MW power plant
• A phosphate mine to fertiliser complex.
• A fluospar beneficiation complex.
Further information on Ovation Capital can be viewed at: www.ovationcapital.co.za.
For further information on the Company, please visit www.ferrumcrescent.com or contact:
Australia enquiries: UK enquiries:
Ferrum Crescent Limited Ferrum Crescent Limited
Tom Revy T: +61 8 9474 2995 Laurence Read (UK representative)
Managing Director T: +44 7557672432
Strand Hanson Limited (Nominated Adviser)
Rory Murphy/Matthew Chandler
T: +44 20 7409 3494
Beaufort Securities Limited (Broker)
Jon Belliss/Elliot Hance
+44 20 7382 8300
South Africa enquiries: Bravura Capital (Pty) Ltd (JSE Sponsor)
Doné Hattingh
T (direct): +27 11 459 5037
Notes to Editors:
Ferrum Crescent’s principal project is the Moonlight Iron Project located in Limpopo Province in the
north of South Africa. The Moonlight Deposit (upon which the Project is based) is a magnetite deposit
located on the Moonlight, Gouda Fontein and Julietta farms and is the main operational focus for the
Company. Iscor Limited (“Iscor”), which explored the Project in the 1980s and '90s, reported
mineralisation capable of producing a concentrate grading at 68.7% iron. At that time, Iscor concluded
that the deposit, which was described as being comparable to the world’s best, was easily mineable
due to its low waste-to-ore ratio. The beneficiation attributes of Moonlight ore are extremely
impressive, with low-intensity magnetic separation considered suitable for optimum concentration.
Metallurgical tests on Moonlight material, undertaken since then by Ferrum Crescent, suggest that
Iscor’s historical results are conservative, that good metal recoveries can be achieved, and that the
resulting concentrates have a high iron content and only negligible impurities, at grind sizes
considered to be industry standard (P80 of 75 - 125 microns).
Key features of the Project to date are:
- JORC (2012) compliant Mineral Resource;
- Historical drilling, drilling by the Group, geological modelling and a high density geophysical
survey conducted by the Company in 2012 confirm tonnage upside potential;
- 30 year Mining Right granted;
- Environmental licence (EIA) in place for the Moonlight mining area (approved 4 April 2013);
- Metallurgical test work indicates the potential for high quality pellets in excess of 69% iron
with low deleterious elements (DR grade pellets for use in direct reduction iron/electric arc
steel-making processes);
- Low stripping ratio; slurry pipeline planned to a pellet plant located at a rail head
(Thabazimbi); export through Richards Bay;
- Duferco offtake partner (4.5 Mtpa plus first right on a further 1.5 Mtpa if not sold domestically);
- Independent valuation by The Mineral Corporation completed in June 2014;
- Located near Kumba railhead at Thabazimbi (Kumba operation depleting in grade), Limpopo
Province, northern South Africa;
- New Eskom power plant (4,800MW) commissioning first 800MW module;
- Richards Bay port expansion for iron ore products.
Date: 14/10/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
