(Yicai) Sept. 24 -- China’s LB Group said the global leading supplier of titanium dioxide plans to acquire control of two mineral sands projects in Western Australia for AUD160 million (USD113 million) in a move aimed at strengthening its access to raw materials.

LB Group or a subsidiary will buy an 80 percent stake in the Durack and Yandanooka mineral sands projects from Titon Resources, a unit of Australia’s Image Resources, in a cash and assets deal, the Jiaozuo-based company announced late yesterday after signing an exclusive letter of intent.

The deal will help LB secure a stable, long-term supply of raw materials for its titanium dioxide and zirconium businesses, while strengthening its resource security and core competitiveness, it pointed out.

The transaction comprises about AUD20 million (USD14.1 million) in cash and about AUD140 million worth of machinery, equipment, and other assets valued by agreement between the parties, according to LB.

Both projects are located in the North Perth Basin, about 300 kilometers north of Perth, and are intended to produce heavy mineral concentrate through mining and processing, with zircon and titanium-bearing minerals -- including ilmenite, rutile, and leucoxene -- among the main valuable minerals. They have exploration licenses but have yet to obtain mining permits or begin mining operations.

Under the JORC 2012 reporting standard, Durack has 37.7 million tons of mineral resources at a total heavy-mineral grade of 2.2 percent, LB said. Yandanooka has 57 million tons at a 3.1 percent grade.

The acquisition constitutes a related-party transaction because LB indirectly holds a combined 22.6 percent stake in Image Resources through two subsidiaries, making it that firm’s largest shareholder. Xu Ran, LB's controlling shareholder and chairwoman, is also a director of Image Resources, according to the announcement.

The parties will consider relevant factors and negotiate the specific investment structure for the deal, such as a direct acquisition of shares in the project company or the establishment of an unincorporated joint venture for the projects. Through negotiation, the parties will decide the final number for the size of the deal and the exact ownership ratios.

The transaction remains subject to due diligence and valuation, signing, and approval by each companies' shareholders and Australian regulators, including the Foreign Investment Review Board, LB noted.

LB’s shares [SHE: 002601] closed down 1.6 percent at CNY15.00 (USD2.24) each in Shenzhen today after rising as much as 1 percent earlier. Pressured by the marked rise in US Treasury yields overnight, China’s stock market faced heavy selling pressure today. The benchmark Shenzhen Component Index fell 2.3 percent at the close.

Editor: Tom Litting