Australian Zircon has been thrown a $40 million lifeline

Oct. 10, 2010 - An agreement announced today allows a six-month window for Australian Zircon to transfer all of its assets aside from its WIM150 tenements in Victoria to a new joint venture company in return for a $16.25 million payment and a 35 per cent interest in the new company.
The purchaser has a further year to require the transfer of Australian Zircon's WIM150 assets for a further $23.75 million payment.
The purchaser is descibed as "an Australian incorporated entity that is wholly owned by a private group'' based in China believed to be Orient Zirconic Resources (Australia), a company registered last month and owned by Guangdong Orient Zirconic Ind Sci & Tech Co.
The company is understood to have signed a letter of intent with Australian Zircon's 70 per cent shareholder, DCM Decometal, in June.
The deal is still contingent on foreign investment and other regulatory approvals, and must also be approved by Australian Zircon's remaining shareholders.
However, the deal has already given company administrator Bryan Hughes a sweetener - a $20 million advance to pay down debts owed to DCM while also displacing smaller creditors.
"The purchaser will take first ranking security over the company's assets to secure repayment of the loan subject to all necessary approvals,'' company secretary Steve McEwen in a statement to the Australian Securities Exchange.
"The balance of the funds owing to DCM will be secured by second ranking securities over the Company's assets.''
The potential transfer of the company's operations represents a step toward the end for Australian Zircon, which was placed in administration in October last year and suspended from quotation in August this year.
Shares remain in a trading halt at 2.7c.