The iron ore company is set to sell one of its assets.
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The Red Hill Iron Limited (ASX: RHI) share price is putting all other ASX shares to shame today, rising an astonishing 275%. This comes after the junior miner is proceeding to sell its 40% interest in the Red Hill Iron Ore Joint Venture (RHIOJV).
At the time of writing, Red Hill Iron shares have accelerated on the announcement to $4.12, up 274.55%.
Details of the transaction
The deal will see Mineral Resources acquire the iron ore asset for $400 million over two instalments. The first $200 million will be paid in cash on completion of the sale agreement. The remaining $200 million will be due when the first commercial shipment of iron ore extracted from RHIOJV leaves the port.
In addition to the cash consideration, Mineral Resources will pay a royalty fee of 0.75% of free on board (FOB) revenue. This is based on all iron ore that is mined and sold from the Red Hill tenements and the company’s Bungaroo South tenement. The latter is dependent on the condition the Bungaroo South tenement is developed in association with the RHIOJV tenements.
It’s worth noting the sale is subject to shareholder approval and does not include other mineral rights over the RHIOJV tenements.
Red Hill has recommended its shareholders vote in favour of the proposed transaction. A meeting will be held on 2 September 2021 to allow shareholders to cast their votes on the sale.
The company noted that Mineral Resources has the necessary means to secure funding and develop the RHIOJV into production. As such, Mineral Resources intends to build a proposed private road, transporting ore to port within 2 years.
The RHIOJV tenements contain a mineral resource of 820 million tonnes (Mt) with a grade of 56.44% iron ore. Red Hill Iron owns a 40% stake while the remaining 60% interest is controlled by the Australian Premium Iron Joint Venture (APIJV).
About the Red Hill Iron share price
Shareholders will be gleefully smiling with Red Hill Iron shares zooming 275% higher today. Over the last 12 months, the company’s share price has recorded gains of 2,525% and year-to-date above 1,600%.
This means if you invested $1,000 in Red Hill Iron shares this time last year, you would be sitting on $24,000. Not a bad return for watching your portfolio grow.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.