WPG Resources has agreed to sell its iron ore assets in South Australia to OneSteel Limited  for about $346 million, crystallising a 400% return on the company's iron ore investment of $70 million.

 

The transaction will be effected by the sale of WPG’s subsidiaries Southern Iron Pty Ltd, Central Iron Pty Ltd and Coober Pedy Resources Pty Ltd.

Southern Iron’s principal project assets are the Peculiar Knob mining lease and the Buzzard mineral claim, and all approvals and tenements in the Coober Pedy  area necessary to develop the Peculiar Knob project.

 

Central Iron owns the Hawks Nest exploration licence, while Coober Pedy Resources owns the Mt Brady and Windy Valley tenements.

 

The sale does not include WPG’s subsidiary Spencer Gulf Ports Pty Ltd which owns land in Port Pirie and the right to develop a bulk commodities export facility pursuant to the development consent previously announced.

Neither does it include Southern Coal Holdings Pty Ltd, the joint venture vehicle with Evergreen Energy Inc that owns the Penrhyn and Lochiel North coal deposits and which has the exclusive rights to use Evergreen’s coal upgrading technology in Australia for the first 15 mtpa of product coal from any project, not just from tenements that it currently holds.

OneSteel will provide a bridging finance facility of up to $140 million to enable project development to continue at its current pace. This facility will remain in place for up to 18 months regardless of whether the sale proceeds to completion.

 

In its statement to the ASX, WPG said it understands that OneSteel will use Whyalla, not Port Pirie, for exporting iron ore from Peculiar Knob and other iron ore deposits developed on the tenements acquired if the transaction proceeds to completion.

OneSteel will offer employment to all of WPG’s South Australian employees and some of WPG’s employees in its Sydney office.