Lynas to Acquire 40% in West Australian Iron Ore Project

Lynas Corporation Ltd has signed a conditional Heads of Agreement with China Iron and Steel Industry Trade Group Corporation (CSG), the only industrial and trading organisation in the iron and steel industry wholly owned by the Central Government of China, for an acquisition of the Channar iron ore project in Western Australia.

The acquisition will deliver Lynas an economic interest in 4 million tonnes of iron ore per annum generating for Lynas around $26 million annual operational cash flow.

Lynas President and CEO Nick Curtis said: “The directors of Lynas are delighted with the decision of CSG to join with Lynas to develop an Australian natural resources company with particular focus on the China market. CSG bring to Lynas a unique and very high quality iron ore asset, with a strong operating cash flow. In addition CSG bring access to a growing China market for iron ore and metallurgical coal. With the support of CSG Lynas intends to pursue further investment opportunities in these exciting sectors.

“It is pleasing that CSG in effect will be using Australian-sourced capital through Lynas to develop equity interests in raw material supply for the Chinese iron and steel industry.

“In addition CSG will bring to Lynas a strong Chinese partner for the development of the world-class Rare Earths and rare metals projects at Mt Weld. CSG have extensive experience in the Rare Earths and rare metals industry and are very confident in the future of the industry,” Mr Curtis said.

The Channar project commenced production in 1990 and produces 10 million tons of iron ore per annum with mine life scheduled through to 2013. CSG currently markets the full production from the Channar project and will continue to market all of the Lynas iron ore production share.

The final price for the purchase will be determined by agreement between the parties following receipt of an independent valuation estimating the current market value of Channar. It has been agreed that the consideration will include the issue of 100 million fully paid Lynas shares at a price of AUD 0.22, which reflects the market price of Lynas during the course of negotiations with CSG. The balance of the purchase price will be payable in cash, including vendor financing.

On completion of the transaction CSG will become the ultimate holder of approximately 42.5% of Lynas on a fully diluted basis, and become its largest shareholder. CSG will appoint two directors to the board of Lynas. Executive management of Lynas will be unchanged.

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