The transaction would see Rio Tinto Mining and Exploration sell its 60% interest and rights in a farm-in and joint venture for the project, where work has already included environmental baseline and scoping studies, conceptual operation studies and marine geophysical surveys.

The project comprises two tenements, Mokau and Manukau, covering more than 1200sq.km up to 2km offshore of the North Island’s west coast

Iron sands at the site comprise a solid solution of titanium, magnesium, manganese and vanadium.

“We have identified two highly prospective projects and have also been able to negotiate terms that involve a low entry cost, with a deferred payment once the project moves into production,” Hodges managing director Mark Major said.

“This transaction could represent a company-making deal for Hodges.”

Under the sale agreement, Hodges will acquire a 60% interest in the project by sol funding and delivering a prefeasibility study to the JV and may earn up to 80% by sole funding a feasibility study to completion.

Additional consideration will include a $NZ100,000 ($A89,300) cash deposit on execution of the agreement, plus $5 million on start-up of commercial production and a royalty payment of $US1 per tonne for the first 10 million tonnes and 50c/t for the next 90Mt produced.

There will be no royalty after 100Mt of commercial production.

The sale remains subject to license renewal and transfer of permits, including the consent by the overseas Investment Office of New Zealand.

Hodges has also signed a $A3 million facility agreement with BNM Australia Group which may be draw down at any time.

Interst will be paid at 2% every six months with a term of three years from the date of first drawdown.

This funding will be augmented by a placement of up to 20 million Hodges shares at 3c per share, which represents an 89% premium to the company’s 30-day value-weighted average price.

“The directors believe the project has the potential to become a world-class iron sands operation capable of producing a highly marketable titanomagnetite product,” Major said.

“The project is closely situated to key end markets and is located in a first world jurisdiction where similar iron sands operations already exist or are under development.”

The company said the world to date has allowed the estimation of a “very conservative” exploration target of 2.5-3 billion tonnes grading 8-16% iron.

This was based on broad spaced drilling and aeromagnetic survey information from a third party at the project’s Mokau block.