ASX-listed Cyclone Metals on Monday announced a binding commercial agreement with Vale for the joint development of the Iron Bear iron-ore project in Canada. 

Under the terms of the agreement, Vale would provide up to $138-million in funding for the project in two phases, earning a 75% interest in Iron Bear. Should Vale proceed to a decision to mine, the company would have the option to acquire the remaining 25% at fair market value or carry Cyclone to production without dilution.

Cyclone Metals CEO Paul Berend stated that the agreement provided a clear path for the project to reach production. He noted that Vale's dominance in the low-carbon and direct reduction iron-ore market made the group an ideal partner and future operator for the project.

Vale’s investment is structured in two phases. In Phase 1, Vale would contribute $18-million to fund a preliminary feasibility study, mineral resource drilling, and environmental baseline studies. Completion of this phase would allow Vale to elect to proceed with Phase 2, at which point a joint venture (JV) would be formed, granting Vale an initial 30% equity interest in Iron Bear.

Phase 2 involved Vale funding an additional $120-million towards a bankable feasibility study, environmental-impact assessments, and impact benefit agreements with First Nations. Once the full Phase 2 contribution was expended or Vale decided to proceed with the decision to mine, its stake in the JV would increase to 75%. During this phase, governance of the JV would be shared, with both companies holding equal board representation until Vale secured its majority interest.

Following the decision to mine, Vale would have the right to acquire Cyclone’s remaining 25% equity stake, subject to shareholder approval if required under ASX listing rules. Alternatively, Vale could fund the project's capital expenditure (capex) on a non-dilutionary basis, allowing Cyclone to retain its 25% interest. If Cyclone’s shareholders rejected a buyout offer, the company must fund its share of production capex or be diluted.

Vale also secured a right of first refusal on any third-party offers for Cyclone’s stake in the Iron Bear JV.

The Iron Bear project is located in Canada, less than 25 km from an open-access heavy haul railway connected to an iron-ore export port at Schefferville. The project hosts an iron-ore resource of 16.6-billion tonnes at 29.3% iron, with pilot plant production confirming a high-quality direct reduction concentrate grading 71.3% iron. 

Development is progressing, with bulk samples of direct reduction and blast furnace concentrates expected to be available for steel mill clients in the first quarter of 2025, followed by pellet production in the second quarter.