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another article from Hellsten

Strike says it can’t lose from shoot-out process

by AJM Staff — created Oct 04, 2012 10:44 AM

Strike Resources has been placed in a trading halt on the ASX until October 8, pending the results of a shoot-out process with its partner in a Peruvian magnetite project.






Opaban deposit at the Apurimac iron ore project in the Peruvian Andes.


Strike’s iron ore hopes in Peru are centred on the Apurimac project, where its concessions cover 59,000ha. The company has amassed a JORC resource of 269mt at 57.3% Fe after seven years of exploration.

The Australian junior's interests are housed in an entity called Apurimac Ferrum (AF), which is owned 50:50 by it and Peruvian partner, D&C Group.

Strike’s share price has been languishing as a dispute with D&C has stalled progress on the promising $3bn iron ore project, 480kms south west of Lima in the Andes.

In May, with negotiations at an impasse, Strike notified AF that it was triggering a ‘shoot-out’, a process allowed for according to the terms of a settlement document that the two partners agreed to after an earlier, now resolved, fall-out in 2010.

In August, Strike submitted its offer to D&C Group, to acquire the latter’s 50% interest in AF for US$3.2m, managing director Ken Hellsten explained.

“Because we have been funding Apurimac over the years, we have got about $35m in loans that we have made to that company.

“We have bid a low price for their shares at $100 and if they accept, we have to pay them $3.3m. If they wish to match our shares, then they have to pay us the $100 for our shares and repay our $35m loans.

“Next week we will either have 100% of Apurimac Ferrum or we will have $35m, plus the $20m cash we have in the bank plus $4m we hope to receive from a transaction on our Berau Indonesian project. All up, we would have about $60m in cash.”

Hellsten said the current resource defined at Apurimac represents “a good half of the project”.

“We need to get to in the order of 500mt to have enough size to develop a 15-20 year business. We are confident that is there.”

According to Hellsten, Apurimac has a lot of positive elements: low strip ratios and low silica content in an orebody that is coarse grained and easy to convert to a concentrate.

“All the studies done to date say the operating costs are less than $20 a tonne. From my history, I am a little more cautious than that. But even if the costs are 50% higher, it still makes a good business.”

Current estimates put Apurimac’s capital costs at about US$150 per tonne, which “is on par with a lot of the expansions going on in Australia at the moment.”

Rothschild is advising Strike during the shoot out process. Hellsten said should Strike gain ownership of Apurimac, the financial advisory firm would assist in finding a partner to contribute to project development.

"Already there is a significant amount of interest from prospective partners in getting involved in the project,” Hellsten said.