NMDC buys 50% in Australia's Legacy Iron Ore for Rs 93 crore

New Delhi/Hyderabad: State-owned NMDC has reached an agreement to purchase a 50 percent stake in Australia-based Legacy Iron Ore as cornerstone investor for nearly 19 million Australian dollars, around Rs 93 crore, which will mark the PSU’s first-ever overseas acquisition.

In a filing to the Australian Securities Exchange (ASX), Legacy Iron said, “The board has now agreed to a proposal from NMDC, which involves NMDC subscribing for approximately 18.89 million Australian dollars (approximately Rs 92.21 crore, at an exchange rate of Rs 48.81 per AUD) in equity for 50 percent of Legacy.”

“The proposal is subject to Legacy shareholders’ approval, as well as other legal and regulatory approvals,” the filing said.

When contacted, NMDC Director (Finance) S Thiagarajan said this is an initial investment and further investment will depend on project requirements.

The Legacy filing added that “the AUD 18.89 million will be for a minimum allocation of approximately 238 million shares, with the final number of shares to be issued and the deemed subscription price being subject to the total shares on issue at the time NMDC and Legacy execute the formal subscription agreement.”

Meanwhile, after the announcement, shares of Legacy tanked by 23.68 per cent to 0.145 cents apiece on the ASX and trading of its shares has been halted.

The deal will be first foreign acquisition for NMDC, which has been scouting for natural resources abroad in countries like Russia, United States, Afghanistan, Uzbekistan, Canada and South Africa, among other countries.

The deal marks the culmination of a Memorandum of Understanding signed between the two firms on May 24 this year and since then, Legacy has been inundated with offers to form joint ventures and fund numerous advanced resource opportunities, Heng further said.

Shareholders of the Australian firm are likely to meet in November to approve the deal, the company said. Simultaneous to the deal, Legacy will also float a new company to develop its Mt Bevan joint venture project, the company said, adding that it intends to list the JV on the ASX later.

“The purpose of the proposed restructure will be for Legacy’s interest in various projects to be held separately from the rest of Legacy’s portfolio, allowing these assets to grow with standalone funding, whilst ensuring the ongoing development of large scale bulk commodity projects,” the company said.

The Australian miner also informed the Australian Securities Exchange that NMDC has the right to nominate the majority of directors to the Legacy board.

According to the deal, Legacy, which currently has approximately 120 million outstanding options at various prices, will also issue an equal number of options to NMDC, subject to certain conditions, including a bar on exercising them until a current Legacy option holder exercises its option first.

Earlier, on September 14, NMDC had put in a binding bid for acquiring a 50 per cent stake in Legacy, which has five exploration licences in Australia, including for gold mining.

The Australian firm based in Perth holds prospective iron ore tenements in both the central Yilgarn and Pilbara areas of Western Australia.

“With our expertise in iron ore mining and steel-making and their (Legacy’s) exploration expertise, we will make a perfect synergy for both the companies. Simultaneously, it will provide us a ready-made foothold in Australia,” NMDC Chairman Rana Som had said last week.

The Legacy filing also listed out number of benefits to having NMDC as strategic investor, including a substantial cash injection from an debt-free investor and having about $4 billion in cash.

It also said this would also help Legacy grow into a substantial mining company from its current status of a junior exploration firm, on account of help extended of NMDC for development of its projects.

PTI