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Troy Resources Signs Agreement to Sell High Grade Iron Ore Obtained from Andorinhas Gold Mine

Troy Resources NL has announced it has signed the Definitive Agreement with Mineracao Floresta Do Araguaia for the sale of the high grade colluvial iron ore found on the Andorinhas Gold Mine leases.

HIGHLIGHTS

  • The final agreement has been executed to sell the high grade colluvial iron ore on the Andorinhas leases
  • The Company has received US$1m of the "Initial Staged Payments" of US$4m – the remaining US$3m is scheduled to be paid over the next 12 months
  • Expected annual royalty payments, once production commences, of more than US$3m based on current iron ore prices and minimum monthly volumes.

Key terms of the Agreement include:

  • MFA to pay Troy US$4m through staged payments over FY2011 and FY2012 made up of:
    • US$1m on signing the Definitive Agreement;
    • US$1m within 180 days of signing the Definitive Agreement subject to certain conditions around receiving the relevant environmental approvals; and
    • US$2m within 360 days of signing the Definitive Agreement subject to certain conditions around departmental approvals.
  • In addition to the above payments, MFA will pay certain production based payments related to the tonnages mined and the relevant benchmark iron ore prices:
    • MFA must undertake mining production of a minimum of 40,000 tonnes per month of Lump iron ore and pay Troy:
      • US$3 per tonne when the iron ore price is up to US$60/t
      • US$4 per tonne when the iron ore price is in the range of US$60/t to US$70/t
      • US$5 per tonne when the iron ore price is in the range of US$70/t to US$120/t and
      • US$6 per tonne when the iron ore price is above US$120/t.
    • MFA must undertake mining production of a minimum of 30,000 tonnes per month of Sinter Fines iron ore and pay Troy:
      • US$1.50 per tonne when the iron ore price is up to US$60/t
      • US$2 per tonne when the iron ore price is in the range of US$60/t to US$70/t
      • US$2.50 per tonne when the iron ore price is in the range of US$70/t to US$120/t and
      • US$3 per tonne when the iron ore price is above US$120/t.

Commenting on the signing of the Agreement, Troy's CEO Paul Benson said: "It is very pleasing to have completed this transaction with MFA. This is an excellent outcome for both companies. MFA currently operates an iron ore mine on the leases neighbouring our Andorinhas project and mines the same colluvial ore. MFA's current operation has excess capacity and this arrangement will allow MFA to continue operations at maximum production.

"For Troy, this relationship has a number of key advantages:

  • It monetises our iron ore assets without the need for capital investment or distracting operating personnel from their focus of operating our gold mine.
  • The iron ore operation is really a logistics exercise and MFA currently operate a large fleet of highway trucks carting the iron ore 300kms to market at Maraba. Therefore MFA will be able to seamlessly combine the additional ore production into their existing operation.
  • Another important benefit is that Troy could not justify a sintering operation and thus the sale of fines material would have been problematic.

"We see this as a significant source of revenue for the Andorinhas site with initial payments of US$4m spread out over 12 months and annual payments of over US$3m, once production commences, based on current price and production assumptions. MFA's initial focus is complete permitting. At this stage we assume they will start production within 12 months but obviously this will depend on market conditions at the time.

"In 2008 we defined an initial colluvial iron ore Reserve of 2.8Mt grading 63.6% iron ore in hematite. We also identified potential for bedrock hosted iron ore in the same area which was not included in the Reserve. Until we understood how we were going to commercialise the deposit it made no sense to increase the Reserve through more exploration. At this stage, based on our regional reconnaissance exploration, we believe there is good potential to increase the Reserve."

Geological information in this Report has been compiled by Troy's Vice President Exploration & Business Development, Peter Doyle, who:

  • Is a full time employee of Troy Resources NL
  • Has sufficient experience which is relevant to the type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'
  • Is a Fellow of the Australasian Institute of Mining and Metallurgy
  • Has consented in writing to the inclusion of this data

Information of a scientific or technical nature in this report was prepared under the supervision of Peter J. Doyle, Vice President Exploration and Business Development of Troy, a "qualified person" under National Instrument 43-101 – "Standards of Disclosure for Mineral Projects", a Fellow of the Australasian Institute of Mining and Metallurgy. Mr. Doyle has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a "competent person" as defined in the 2004 edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr. Doyle has reviewed and approved the information contained in this report. For further information regarding the Company's Andorinhas Project in Brazil, including a description of Troy's quality assurance program, quality control measures, the geology, samples collection and testing procedures in respect of the Casposo project please refer to the technical reports filed Andorinhas Iron Ore Project, Para State Brazil dated September 2008 which is available under the Company's profile at sedar.com on the company's website.

Source: Troy Resources NL

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