Metal Mining LLC signed an investment and cooperation agreement for the development of an existing iron ore mine in Mongolia.
The partner company’s registries activities are foreign trade, exploration and exploitation of minerals and mine operations. The company have two mining licenses 12263A, 15152A and two exploration licenses 10444X, 12141X the existing iron ore mine has 7,1 million tons of iron ore reserves. The 12141X exploration licenses areas (3 139 HA) has 66 million tons iron ore reserves and can be excavated in the future.
Value of the investments $ 50 million (first instalment).
We are going to use this amount at loan to financing the current mining works, the repayment of the previous loan, the exploration of new potential mining fields and buying up new wet processing plant, and increase the production to 1 million ton / year.
The two exploitation and two exploration license are valid for the following 30 years period.
According to the agreement between the two companies, we will define the future development orientation and strategies together, while the financial foundation and the organization of mining activities will be partner responsibility.
The future development and investments are going to worth around $ 42 million. (second instalment ) will start after the exploration works
The first mine is located 250 km from Ulaanbaatar, it has 7,1 million tons of iron ore reserves (JORC) and with future explorations this number will increase to 15 million tons in 2011. From 2011, China Steel Group is going to buy up all the complete extraction. Current price of a 57% content iron ore is $ 80/ton, next year the new price with the instalment of wet processing plant will increase the content to 65% as well as the price to $ 125/ton with the profit margin of $ 75/ton (expenses $50/ton). The current production is 500 thousand tons per year, the planned production will rise to 1 million tons per year after the $ 50 million technological development investment. (first instalment)
With the wet processing procedure the price will be $ 125/ton, the net profit after tax is estimated to be $ 55 million/year.
As far as the current exploration stands in the second mine, it’s natural iron ore reserves are around 66 million tons, but there are other exploration still in progress.
The exploitation- and exploration licenses cover 3743 HA territory, where can be also found other valuable natural resources.
The partners agreed not to pay dividends until the full repayment of the loan.
All the listed tools and equipment’s will be purchased from Chines, Russian and Mongolian subcontractors.
All the above stated conducting exploration activities in the iron ore deposit site submitted by Mon Laa LLC, the offer of the Geological and Mining Cadaster (OGMC) under the Mineral Resources and Petroleum Authority of Mongolia (MRPAM). By the request of Holding, an independent expert MICROMINE Consulting Services confirmed those numbers.
Our short-term goals are the full repayment of the loan and a profitable operation for the following years, while our long-term orientation, in the function of global market situations, is to go on public.
The proposed investment repayment can be realize in one year after the 1 million ton/year production capacity installation and organization.
