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Cape Lambert Iron Ore has negotiated the potential £180 million sale of its key project to China Metallurgical Group Corporation.

Based in West Australian capital Perth and quoted on AIM, Cape Lambert has signed a memorandum of understanding with China Metallurgical (MCC), a conglomerate with £9 billion annual turnover, to sell the Cape Lambert iron ore project in Western Australia’s Pilbara region. The Australian company, which recently upgraded the potential resource there to 979 million tonnes of iron ore, says MCC has paid a deposit of £4.7 million, half of it non-refundable.

Now, if the Cape Lambert deposit and other aspects of the deal stand up to due diligence and the sale wins approval from the relevant Chinese and Australian authorities, MCC will pay over the rest of the A$400 million (£180 million) in three tranches. The Chinese group already owns 20 per cent of the £2.4 billion Sino Iron project, 120 km from Cape Lambert.

Ian Burston, chairman of Cape Lambert, says the company has been committed to developing the Cape Lambert project itself. But, he argues, ‘this opportunity has the potential to deliver significant up-front value to shareholders and it was therefore incumbent on us to look at it’.

Cape Lambert plans to retain a three-kilometre iron ore tenement south of the main project. Meanwhile, the prospect of a near-£200 million cash sale for a company now valued at £87.3 million, has sent Cape Lambert shares 8.5p up to 31p, nearly three times their level a year ago and only 0.5p off last June’s high.

They could go further.

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Cape Lambert Iron Ore Ltd.	AIM	£39.28m	7.75p	-0.25p
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