SmallCapNews | Red Rock Resources cheers “company transforming” deal for Jupiter Mines

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Red Rock Resources cheers “company transforming” deal for Jupiter Mines

01 March 2010

Red Rock Resources, the AIM-listed mining group, today said that its 25.1% owned Australian associate Jupiter Mines had announced a “company transforming” transaction.

Under the terms of the proposed deal, Jupiter will acquire a 49.9% interest in the world-class Tshipi Kalahari Manganese Project in South Africa from a group of investors including Jupiter’s own 25.1% shareholder Pallinghurst Resources.

In return for the project, Jupiter will issue 1,160,363,867 new ordinary shares to the Pallinghurst co-investors at a price of A$0.2110 each, implying a value of approximately A$490 million for the Tshipi Project, which has a SAMREC-compliant mineral resource of 163m tonnes grading 37.1% manganese.

Jupiter said that, on completion, the acquisition would transform the company by significantly accelerating its “Steel Feed Corporation” (SFC) strategy and position it as a major manganese and iron ore explorer/developer, with a manganese project it can immediately develop.

The transaction will also deliver a number of international blue-chip strategic investors to the Jupiter share register, including AMCI, Midstream & Resources and Investec. According to red Rock, the investors endorse Jupiter’s SFC strategy and have the necessary financial resources to back it. In addition, Brian Gilbertson, the chairman and founder of Pallinghurst, will join the Jupiter board as a non-executive director.

The Tshipi project is currently 100% owned by Tshipi é Ntle Manganese Mining (Pty) Ltd whose current shareholders comprise Ntsimbintle (50.1%) and the Pallinghurst co-investors (49.9%). It is located in the Kalahari Basin in the Northern Cape district of South Africa, one of the most prolific manganese regions in the world.

During 2008-09, Tshipi é Ntle completed a comprehensive drilling campaign as part of the project feasibility study. This generated a SAMREC-compliant resource of 163m tonnes grading 37.1% manganese and indicated the potential for additional resources beyond the currently defined levels.

The capital cost of such a project is estimated at US$200 million of which Jupiter’s share will be US$100 million. It is anticipated that mine development will begin in 2010 with the aim of starting production no later than early 2013. However, a fast-track mine development schedule is also being considered and this could result in earlier market entry.

Red Rock’s chairman, Andrew Bell, said: “This transaction takes away in our view the downside risk in Jupiter. The Pallinghurst team have execution capability and we believe they can deliver production from Tshipi within three years with a pre-tax profit potential to Jupiter of $100 million a year based on current costs and prices.

“The 1bn tons plus potential of the Mt Ida high quality magnetite, the Yilgarn haematite strategy, and the manganese potential of Oakover then constitute the known upside potential, while the unquantifiable upside is the personal commitment of Brian Gilbertson and his team to building Jupiter up into a force in the steel feed sector, and the entry of some large co-investors with coal and iron ore projects onto the share register. This is a good deal for Jupiter and a good deal for us.”