Shanshan Shares (600884) announced that on May 28, the company signed a framework cooperation agreement with Heron Resources Limited (Australian Securities Exchange ASX: ticker symbol HRR, hereinafter referred to as “Heron”) in Perth, Australia, regarding the Yerilla nickel-cobalt mining project, thereby meeting the company’s substantial demand for nickel and cobalt resources.
The company intends to subscribe for 12,046,940 shares of Heron stock (representing 4.99% of Heron’s issued share capital), at a price equal to 120% of the volume-weighted average trading price of Heron on the Australian Securities Exchange during the 15 days preceding the date of signature of this agreement. In addition, the company will also hold two further subscription options, each entitling it to subscribe for an additional 5% of Heron’s issued share capital.
     Holding Company for the Yerilla Nickel-Cobalt Project
According to Heron’s 2008 annual report, Heron’s JORC-compliant resources consist of the Kalgoorlie nickel-cobalt deposit, with approximately 981.7 million tons of nickel at a cut-off grade of 0.72%, and the Yerilla nickel-cobalt deposit, with about 135.3 million tons of nickel at a cut-off grade of 0.77%. Heron’s total nickel metal reserves amount to roughly 8.13 million tons, and its cobalt metal reserves are approximately 540,000 tons.
As a leading domestic producer of lithium-ion battery materials, the company has significant demand for nickel and cobalt resources.
According to the agreement, the company may, by making separate financial and technological contributions to establish a plant and infrastructure in Australia, process ore into nickel-cobalt concentrate. The project is designed to have a processing capacity of no less than 1 million tons per year of laterite nickel-cobalt ore, yielding a concentrate containing at least 5,000 tons of metals annually. Provided that the project operates at or above 50% of its designed capacity for a continuous period of thirty days, the company and Heron will jointly operate the project as a joint venture (hereinafter referred to as the “JV”). The company will hold a 70% equity stake in the JV, while Heron will contribute all mining rights to the Yerilla nickel-cobalt mine, acquiring a 30% equity stake in the JV. The JV’s board of directors or operating committee (as applicable) will consist of three members: two appointed by the company and one appointed by Heron. The company will appoint the first general manager. The nickel-cobalt concentrate produced by the project will be exclusively purchased by the company and subsequently subjected to further deep processing in China.
According to the framework cooperation agreement, the company will conduct a feasibility study on ore processing for the Yerilla nickel-cobalt project, which is expected to be completed within 24 months after the agreement is signed. This study will determine the project’s economic and technical feasibility and precisely estimate the scale of the next investment phase. Heron will assist the company in collecting key experimental data necessary for obtaining approval for the Australian project.
     Subscribe to a 5% equity stake in Heron Company.
As part of this collaborative arrangement, the company will subscribe to 12,046,940 shares of Heron stock (representing 4.99% of Heron’s issued share capital), subject to the company’s approval procedures, compliance with applicable Chinese and Australian laws, and approval by the competent authorities (if necessary). The subscription price will be 120% of the volume-weighted average price of Heron’s shares traded on the Australian Securities Exchange during the 15 days preceding the date of signature of this agreement.
In addition, the company will also hold two additional subscription options, each equivalent to 5% of Heron’s issued share capital. The first option will be exercised upon decision to proceed with plant construction, at a price equal to 110% of the weighted average trading price of Heron on the Australian Securities Exchange over the 15 days preceding the date designated as the reference date for the decision to build the plant. The second option will be exercised upon completion of construction, at a price equal to 110% of the weighted average trading price of Heron on the Australian Securities Exchange over the 15 days preceding the date designated as the reference date for completion of construction.
The company noted that a prerequisite for this framework cooperation agreement is that the results of the aforementioned feasibility study demonstrate the project’s technical and economic viability and are approved by both parties. The investment scale for this project will be further calculated and finalized based on the feasibility study, and the company will follow its internal approval procedures in accordance with the project’s progress. In addition, this matter also requires approval from the relevant Chinese and Australian laws as well as authorization from the competent authorities.