China Group Beats Down Peru Ore Price

Vancouver-based Cardero Resources has agreed to sell its Pampa de Pongo iron ore property to China’s Nanjinzhao Group for $100m, half the price agreed in October for the Peru asset. “Hongda had requested a price reduction due to difficult global economic conditions that have significantly adversely impacted iron ore prices,” says Cardero. Nanjinzhao subsidiary Hongda Mining, which is acquiring the property, has given a $10m deposit to Cardero Peru, which is non-refundable unless Cardero terminates the agreement or Rio Tinto exercises its right of first offer. “Due to the new lower purchase price, pursuant to its right of first offer Rio Tinto will have another 45-day period to match the revised terms,” says Cardero. The balance of the purchase price is due on the earlier of 10 days after Hongda has received the necessary Chinese governmental approvals to proceed with the purchase, or December 17. The break-up fee payable by Cardero remains $20m. Hongda has agreed to provide within 90 days an irrevocable letter of guarantee from a senior Chinese bank guaranteeing payment of the balance of the purchase price. “The board firmly believes that accepting the offer of $100m is in the best interests of the company and our shareholders, given the current long term projections for the global iron ore markets,” says Cardero president and CEO Henk Van Alphen. “The revised agreement will provide us with very significant amount of near term capital that may potentially be employed in new and strategic opportunities – instead of waiting an indeterminate amount of time for commodity prices to improve and hope to sell for higher price in the future,” he adds. According to Van Alphen, taking Pampa de Pongo to feasibility would have resulted in “massive dilution to the shareholders.” Cardero said in October it had agreed $200m for the property, but would take other offers for a 9-month period.