Adriana Resources (ADI-V) is back up after dropping 15% yesterday as the company reported late in the day that it’s partnering with WISCO International Resources to develop and run the Lac Otelnuk and December Lake iron ore properties in Nunavik, Que. Combined the properties are known as the Lac Otelnuk project.
By late noon today, Adriana’s shares jumped 11% to 90¢, after ending Dec. 19 at 81¢.
WISCO Resources, which is a unit of Wuhan Iron & Steel, currently owns 19.8% of Adriana. WISCO’s parent company is one of the three largest steel producers in China.
As part of the joint venture, WISCO will provide another $91.6 million to fulfill its $120-million commitment to Adriana. The Chinese company initially signed a binding framework agreement with the junior on Jan. 17, 2011.
Of the new funds Adriana says $40 million will to go towards the joint-venture entity. The company plans to transfer its interest in the Lac Otelnuk project into the joint-venture once the agreement closes following regulatory and shareholder approvals. The transaction is expected to be completed around Jan. 19, 2012.
Afterwards, WISCO will control 60% of the project, while Adriana will hold the remainder.
WISCO is responsible for securing 70% of the costs required to put Lac Otelnuk into production. The capital required for the project will be calculated in a bankable feasibility study.
The joint-venture company aims to start the feasibility study in 2012, and estimates it would take a year to finish. Concurrently, it intends to negotiate Impact Benefit Agreements with the Inuit and First Nations in the project area.
WISCO has also agreed to assist the junior in funding its share of costs if it runs into problems.
Both Adriana and WISCO say they will buy all of Lac Otelnuk’s production at fair market value in proportion to their respective equity ratios in the project.
Based on an August 2011 updated resource estimate, Lac Otelnuk hosts 4.89 billion tonnes grading 29% of total iron in the measured and indicated category. It has another 1.56 billion tonnes of 29.6% total iron in the inferred category.
Adriana points out that the defined resource includes only 9 km of strike length, whereas recent exploration has extended the potential strike of iron formation from 25 to 42 km.
The company plans to revise the resource once all the results from the 2011 drilling season are in. During the year, Adriana poked 113 holes or 15,333 metres on the project, bringing the total metres drilled since 2007 to more than 28,000.
Century Iron Mines (FER-T) is another iron ore junior with properties in Quebec, and Newfoundland and Labrador that WISCO has a stake in. WISCO will provide Century with $120 million to receive a 40% interest in each the Duncan Lake, Attikamagen and Sunny Lake projects. On Dec. 19, Century said it had completed joint-venture agreements with WISCO for its Attikamagen and Sunny Lake projects, while the agreement for Duncan is still pending.
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