Cyclone Metals Ltd (ASX:CLE) has signed a Memorandum of Understanding (MOU) with Brazilian multinational miner Vale S.A which would enable the latter to gain a controlling interest in Cyclone’s Iron Bear iron ore project in Canada, through a two-phased investment pathway.

As part of the first phase, Vale would spend up to US$18 million to support development activities for the project, including a preliminary feasibility study (PFS), mineral resource drilling and environmental baseline studies.

In the second phase, Vale would have the chance to form a corporate joint venture with Cyclone and take on a 30%, with this increasing to 75% if Vale reaches the Decision to Mine (DTM) stage, or when its spending on the play reaches US$120 million.

Throughout Phase 2, both Vale and Cyclone would hold two of five board seats on the Iron Bear JV governing board, until Vale reaches the point of achieving 75% interest in the project.

The Brazilian multinational would also have the option to gain the final 25% of shares once DTM is achieved, although another option has also been considered: in which Vale could loan carry Cyclone’s share of CAPEX and be returned from its share of future operating profits.

Cyclone CEO Paul Berend said he expected the partnership to be a fruitful one.

“Vale is a powerhouse for the production of ultra clean iron ore products which includes DR pellets and their proprietary cold briquettes,” he said.

“They are an ideal partner for us, and we look forward to leveraging Vale’s extensive operational and financial resources to realise the full potential of Iron Bear.”

Cyclone has been trading at 1.9 cents.

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