No political hurdles for Centrex Metals' China marriage

The Australian Government has approved a Chinese-based investment worth up to US$245.5 million in Centrex Metals which plans to develop iron ore deposits on South Australia's Eyre Peninsula.

PERTH - 

Centrex Ltd (ASX: CXM) said today the Foreign Investment Review Board (FIRB) decision is unconditional and has cleared the way for China's Wuhan Iron & Steel (Group) Co (WISCO), to earn a 60% stake in the iron ore rights to five Centrex-owned tenements.

WISCO, China's third largest steelmaking combine has told Centrex that China's National Development Reform Commission (NDRC) has also approved its investment in the Australian iron group.

WISCO will earn its interest in the iron ore rights by taking a 15% stake pre issue (or 13.04% post issue) in the enlarged capital of Centrex for about A$10.1 million (US$9.15 million). This would entitle WISCO to a seat on an expanded six person Board.

The placement by WISCO would expand Centrex's issued shares from 269.3million to 309.7 million, giving a market capitalisation on yesterday's share price of A$0.64 of A$198 million (US$179 million).

WISCO would also inject an additional A$186 million (US$168 million) directly into Centrex, with staged payments based on achieving progressive JORC Inferred resource milestones ranging up to two billion tonnes.

It would also sole fund an additional A$75 million (US$67 million) into Eyre Iron Pty Ltd, the joint venture company for Centrex and WISCO to undertake exploration and develop a target of two 5 million tonnes per annum magnetite concentrate operations.

This is the formal 40:60 Centrex-WISCO joint venture which will undertake the initial exploration and study programs on the five tenements to develop as Stage 1, for two, five million tonne magnetite concentrate operations.

Centrex's managing director Gerard Anderson said Centrex and WISCO will form a 50:50 joint venture to build a cape-size deepwater export port north of Tumby Bay on land owned by Centrex.

David Lindh, chairman of Centrex said: "What this means is that Centrex will enter 2010 with a well funded iron ore growth strategy that under existing contracts and commitments, is already a minerals export business worth around A$500 million (US$453 million) in the next few years."

The ease of this FIRB rubber stamping is a contrast to the problems Western Plains is having in getting Australian Defence Department support for developing its iron ore projects in the mid north of South Australia. The Defence Department has been coy about any projects involving Chinese companies near the Woomera Defence leases.

The same scenario saw the Prominent Hill copper-gold mine excised from the takeover of OZ Minerals' mining and exploration assets by China's Minmetals for A$2.6 billion (US$2.35 B), for Prominent Hill - now the only asset of the re-shaped OZ Minerals - was also considered to be close to Defence Department facilities, which just happen to have been used to house asylum seekers and other illegal immigrants.

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