Hawthorn Resources (ASX:HAW) will convert its 19.6% equity stake in the Mt Bevan Magnetite Project to a 1% royalty.
The joint venture, comprising Hawthorn, Legacy Iron Ore (ASX:LCY), and Hancock Magnetite Holdings, aims to advance the Mt Bevan Magnetite Project.
By converting its equity position to a royalty, Hawthorn will no longer participate as an equity partner but will receive 1% of the net free-on-board revenue from the project.
The decision allows Hawthorn to avoid contributing to the $20 million Forward Works Program, thereby preserving its cash reserves.
Brian Thornton, Managing Director and CEO of Hawthorn Resources, stated, "Mt Bevan is a serious next-generation iron ore project slated as a key ingredient for Green Steel production in Australia. But with an estimated capex approaching $5B, it's not without its challenges including capital intensity and the environmental and social licence approvals required at State and Federal levels."
"For smaller, lower capitalised companies like Hawthorn, the conversion to a valuable 1% royalty is a logical and sensible decision taken in the best interests of all its shareholders," Thornton added.
Hawthorn's board believes this move is in the overall best interest of its shareholders in both the short and long term.
The company will avoid the need to raise additional equity funding to remain an active participant in the project.
Hawthorn Resources is a diversified critical minerals and gold explorer with tenement holdings throughout Western Australia. The company's projects include Mount Bevan Magnetite Project, Mount Bevan Critical Minerals Project and Anglo Saxon Gold Mine.
At the time of reporting, Hawthorn Resources' share price was $0.056.