NMDC to buy 50% in Australia's Legacy for Rs 92 cr

State-owned NMDC has reached an agreement to purchase a 50% stake in Australia-based Legacy Iron Ore as cornerstone investor for nearly 19 million Australian dollars (AUD), which will mark the PSU's first-ever overseas acquisition.

In a filing to the Australian Securities Exchange (ASX), Legacy Iron said, "The board has now agreed to a proposal from NMDC, which involves NMDC subscribing for approximately AU$18.89 million (approximately Rs 92.21 crore, at an exchange rate of Rs 48.81 per AUD) in equity for 50% of Legacy."

"The proposal is subject to Legacy shareholders' approval, as well as other legal and regulatory approvals," the filing said.

When contacted, NMDC Director (Finance) S Thiagarajan told PTI this is an initial investment and further investment will depend on project requirements.

The Legacy filing added that "the AU$18.89 million will be for a minimum allocation of approximately 238 million shares, with the final number of shares to be issued and the deemed subscription price being subject to the total shares on issue at the time NMDC and Legacy execute the formal subscription agreement."

Meanwhile, after the announcement, shares of Legacy tanked by 23.68% to 0.145 cents apiece on the ASX and trading of its shares has been halted.

The deal will be first foreign acquisition for NMDC, which has been scouting for natural resources abroad in countries like Russia, United States, Afghanistan, Uzbekistan, Canada and South Africa, among other countries.

"We are delighted to have secured India's National Mineral Development Corporation as a cornerstone investor in Legacy. It is NMDC's first investment outside of India and after conducting extensive due diligence on Legacy, NMDC have concluded that we are the ideal entry point for them into the Australian iron ore and resource sector," Legacy Chief Executive Officer Sharon Heng said.

She added, "NMDC is not only providing Legacy with funding through the placement, but their presence on the register will create additional opportunities for Legacy, such as the acquisition and divestment of various projects."

The deal marks the culmination of a Memorandum of Understanding signed between the two firms on May 24 this year and since then, Legacy has been inundated with offers to form joint ventures and fund numerous advanced resource opportunities, Heng further said.

"With NMDC on the register and significant financial backing, upon completion of the placement, Legacy will be in a position to actively acquire such projects, to further increase shareholder value," she said.

Shareholders of the Australian firm are likely to meet in November to approve the deal, the company said.

The company said, "The proposed investment by NDMC takes into account all the current assets of Legacy, whilst providing an additional investment for the ongoing completion of Legacy's earn in to the Mount Bevan Joint Venture."

The Australian miner also informed the Australian Securities Exchange that NMDC has the right to nominate the majority of directors to the Legacy board.

According to the deal, Legacy, which currently has approximately 120 million outstanding options at various prices, will also issue an equal number of options to NMDC, subject to certain conditions, including a bar on exercising them until a current Legacy option holder exercises its option first.

Earlier, on September 14, NMDC had put in a binding bid for acquiring a 50% stake in Legacy, which has five exploration licences in Australia, including for gold mining.

The Legacy filing also listed out number of benefits to having NMDC as strategic investor, including a substantial cash injection from an debt-free investor and having about $4 billion in cash.

It also said this would also help Legacy grow into a substantial mining company from its current status of a junior exploration firm, on account of help extended of NMDC for development of its projects.