For the last seven months, Canadian junior Solid Resources (TSXV: SRW) and diversified mining heavyweight Glencore Xstrata (LSE: GLEN) have been completing due diligence on a group of sixty-two iron ore concessions in southeastern Spain known collectively as the Cehegin iron ore property.
Now the two companies are on the verge of signing a joint-venture agreement that will give Glencore Xstrata 20% of the project and the rights to all production off-take if the project becomes a mine.
Cehegin was formerly owned and operated by Altos Hornos de Vizcaya, a Spanish ironworks company and the country’s largest industrial company, which mined Mina Maria, one of the open-pit mines on the concessions, from about 1960 until 1989.
In March, Solid Resources acquired all of the concessions for an initial payment of 225,861.14 (US$314,342.18). If and when the junior receives mining permits for all 62 concessions, it will have to pay the previous owner an additional 2.7 million. If it receives mining permits for fewer than the 62 concessions, its payment will drop to 1.8 million. No net royalties will be due on production.
Glencore did not return an email requesting comment on the joint venture and a spokesman for Solid Resources declined to comment until the agreement is signed.
Cehegin is about 115 km from Cartagena, a deep-sea port that can handle 300,000-ton iron ore freighters. There is a rail spur to the port located just 14 km from the site.
The magnetite iron-ore concentrate previously produced at Cegehin was of a high quality with low impurities, according to Solid Resources, and the concessions, which span about 3,270 hectares, also come with significant historic drill and production data.
The historic data suggests that the concessions hold various sized deposits with grades ranging from 38% to 60% magnetite.
One of the concessions (Mina Maria) was mined using current methods, which included a concentration plant, according to the historic records. Crushing, grinding and magnetic separation at Mina Maria achieved concentrations of 65%-70% iron, Solid Resources says.
Other historic data available to Solid Resources includes aerial magnetic surveys and 1,245 boreholes through rotary percussive drilling.
The Cehegin magnetite ore is closely associated with the Ophites (subvolcanic rocks) to which they are genetically linked with strike zones of more than 1,000 metres and with thicknesses of 15-50 metres.
A historic resource estimate puts measured and indicated resources at 13.56 million tonnes grading 35.5% iron and inferred resources at 62.50 million tonnes grading 40% iron.