Fortescue buys out BC Iron’s Nullagine stake for $1
Fortescue will buy BC Iron’s 75pc stake in their suspended Nullagine JV for $1 and may resume mining.
Andrew Forrest’s Fortescue Metals Group will pay the Kerry Stokes-backed BC Iron just $1 for an additional 75 per cent interest in the mothballed Nullagine iron ore mine in Western Australia’s Pilbara, less than four years after it sold BC a 25 per cent stake in the project for $190 million.
The deal will relieve current owner BC of its future rehabilitation liabilities estimated at around $7.5m, while it will also pick up a 1 to 2 per cent royalty on future production should Fortescue opt to reopen the mine.
Fortescue (FMG) said in a statement it would assess the viability of restarting Nullagine “having regard to ongoing market conditions”.
BC decided to shut down Nullagine in December last year when the benchmark iron ore price slipped below $US40 a tonne. The price has since staged a solid rebound, and currently sits around $US55 a tonne.
In a statement, BC said it believed Nullagine remained marginal even after the improvement in iron ore prices and noted that “based on projected future iron ore prices, it is unlikely that a restart of operations will become viable in the medium term under the current joint venture structure”.
“Nullagine has been a successful operation and BC Iron shareholders have extracted significant value from it over a number of years,” BC Iron chairman Tony Kiernan said.
“BC Iron has now concluded that the sale to Fortescue offers the best potential from a future BC Iron value and risk perspective.”
Back in 2012, BC Iron bought back a 25 per cent stake in Nullagine from Fortescue for $190m while its bigger partner was under balance sheet pressure.
Shares in BC jumped on the news, climbing 2c or 10.8 per cent to 20.5c. FMG was down 2.5c or 0.5 per cent to $4.915.
