Midwest Corporation Ltd will acquire the iron ore rights in a tenement owned by Montezuma Mining Company Ltd that adjoins Midwest's landholdings in Western Australia's Robinson Range.
The tenement is at Montezuma's Mt Padbury project, near Meekatharra.
Under a conditional agreement, Midwest will make cash payments of up to $6 million to the junior minerals explorer and pay a one per cent royalty on the gross proceeds from hematite iron ore, grading 50 per cent or higher, that is sold from the tenement.
Midwest will also pay half a per cent of the gross proceeds from magnetite iron ore, grading between 30 per cent and less than 50 per cent, that is sold from the tenement.
"This is an important extension of our iron ore prospects in the Robinson Range area and we look forward to commencing activities to identify an iron ore resource in this prospective area," Midwest chief executive Bryan Oliver said.
The deal is subject to several conditions including Foreign Investment Review Board approval and finalising heritage arrangements with the Jidi Jidi Aboriginal Corporation.
If the tenure of the tenement is not extended for at least 12 months, Midwest has the right to terminate the agreement and Montezuma must then issue $1 million worth of its shares to Midwest.
Sinosteel Corporation-controlled Midwest remains in a trading halt, which it entered prior to the announcement.
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