Bellzone Mining secures MOU with China International Fund to develop Kalia Iron Ore Project

Shares in Bellzone Mining (AIM: BZM) surged 60% this morning on London’s AIM market, following the announcement of a  transformational joint venture agreement with the China International Fund Limited (CIF), for the 2.4 billion tonne JORC magnetite Kalia iron project in Guinea, West Africa.

"I am delighted to announce this Binding MOU with China International Fund Limited. Under the terms of the Binding MOU, CIF will fund and construct the 286km rail and port facilities for our Kalia Iron Project in return for the right to purchase 100% of the off-take from Kalia”, Bellzone MD Nik Zuks commented.

“In addition, Bellzone will gain a 50% interest in the highly prospective Forecariah Permits located on the proposed rail alignment and in close proximity to the coast. This agreement will significantly de-risk Bellzone's implementation strategy by ensuring Bellzone's production value chain is secured from mine to customer”.

The company has signed a binding Memorandum of Understanding (MOU) with CIF, to develop rail and port infrastructure for the Kalia iron project. Subsequently, the partners will enter into a 50/50 joint venture to develop additional iron permits in guinea.

According to Bellzone, the US$2.7bn CIF infrastructure project is intended to form the first leg of developing a multi-user railway and port, which is expected to open several opportunities for Guinea's mineral deposits.

"This creates the most strategic link of the Transport Network required to unlock Guinea's iron ore potential. It puts two mines on line within four years instead of one and multiplies annual mining revenue tenfold in a short time. It's historical and transformational", the Republic of Guinea’s Minister of Mines and Geology, Mahmoud Thiam stated.

Under the terms of the deal, CIF will fund the entire infrastructure required for the Kalia iron project. Bellzone will transfer an area equal to approximately 50% of the Kalia II Prospect and 100% of the Faranah Permit to CIF. Additionally, Bellzone has agreed that CIF will have rights to purchase 100% of the off-take from the Kalia Prospect at market price - excluding any proceeds from the Kalia II Prospect transferred to CIF.

CIF intends to incorporate a new company, by June 6 2010, for the development of the infrastructure. The Chinese group will invest US$40 million into the new company, solely to fund the feasibility study for the infrastructure required to transport and export production from the Kalia Prospect. Upon finalisation and execution of the definitive agreements, CIF will issue a non-dilutable 10% stake in the new company to Bellzone.

Separately, Bellzone and CIF have agreed to create a 50/50 joint venture to finance, develop, produce, transport, export and sell iron ore from the Forecariah Permits held by a subsidiary of CIF in south west Guinea.

Earlier this month, Bellzone reported its on-going progress at Kalia, as it lodged the ‘Basic Convention’ application with the Guinea Government, and it began its Socioeconomic (SEIA) and Environmental studies (EIA) for the Kalia mine site. Furthermore, in terms of its operations, the company recently started a down-hole survey aimed to extend and upgrade the 2.4bt magnetite JORC resource and began the oxide exploration programme.

Bellzone Mining joined the AIM market of the London Stock Exchange in April, following a£33.6 million placing. Kalia I currently has a maiden inferred magnetite JORC resource of 2.4 Bt. It has been estimated that Kalia I and the 20 km long magnetite strike known as Kalia II, have the potential to host more than 13 Bt of magnetite ore. On top of that, Bellzone estimates that there is 2.9 billion tonnes of oxide ore at surface over Kalia, which can be used to generate early cash flow in 2014.

Back in April, the new AIM-listed shares were issued at 35p each, following this morning’s announcement Bellzone shares reached an intraday high of 61p per share.