South Australia's State Government will be asked to refund almost $6 million in stamp duty after minerals explorer Centrex's decision to wind back its iron ore project near Tumby Bay on the West Coast.
The decision is a setback for the prospects of developing an iron ore province in the region.
Centrex announced today that it had signed a new memorandum of understanding with its project partner Wuhan Iron & Steel (Group) Co. (WISCO) for proposed amendments to the partners' Eyre Iron Magnetite Joint Venture of which Centrex holds a 40 per cent interest.
"The MOU's focus is the joint venture's flagship Fusion project which is sought to be re-scoped and rescheduled to take into account recent changes in iron ore market conditions," Centrex said in a statement today.
"The MOU sets out key amendments to the joint venture that will be incorporated into a binding supplementary deed to be negotiated and executed in the coming months."
Hopes for the project's future were boosted in 2010 when WISCO, one of China's top five steelmakers, paid $A78 million to Centrex for 60 per cent of the iron ore rights to five exploration licences on the Eyre Peninsula.
Today's announcement re-sets the terms and conditions of how to proceed with the project, including Centrex having to relinquish its entitlements to any resource incentive payments payable under the original agreement.
These entitlements represented four potential tranches of $27 million each should the joint venture inferred resources reach agreed levels.
"Centrex paid stamp duty on the resource incentive payments for the sum of $5.9 million in 2010," the statement said.
"An application will be made to the South Australian Government for a refund of this amount on execution of the eventual Supplementary Deed."
The new deal pushes the project back to pre-feasibility status and shifts funding commitments.
"This will see the project move back into a pre-feasibility study over the next 12 to 24 months to assess the expanded project.
"Given the uncertainty over triggering the resource incentive payments, with the joint venture still quite some way from the first milestone mark, and land access constraints in the area, Centrex believes in the current market the priority is for a bankable feasibility study funding path that is isolated from its current cash reserves," Centrex said today.
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