Fortescue Metals buys an iron ore mine for just $1

Fiule photo of Andrew Forest at one of Fortescue’s iron ore projects. Image: Supplied.

Billionaire Andrew (Twiggy) Forrest’s Fortescue Metals is paying just $1 to buyout BC Iron’s 75% interest in the Nullagine joint venture mine north of Newman in the Pilbara region of Western Australia.

Fortescue is now seeing if there is a viable was to restart operations at the iron ore mine. The acquisition includes all assets and rehabilitation obligations.

BC Iron shares jumped 16% to $0.21. Fortescue shares closed 1.8% higher at $5.03.

Operations at the mine were suspended in late 2015 because the cost of digging up the iron was higher than sales prices. The mine has 26.7 million tonnes of ore reserves and the capacity to export 6 million tonnes a year.

Iron ore prices are around $US55.86, close to the the price of producing a tonne at the mine. Fortescue, however, owns much of the infrastructure to get the ore to the coast.

BC Iron still has a $US1.5 million debt obligation to Henghou Industries and an obligation to pay $5.2 million in deferred state government royalties.

Fortescue will also pay BC Iron a royalty, up to $7.5 million, from any sales of iron ore mined in the future.

“We will review operations over the coming months to determine the best path forward, taking into account all relevant factors including market demand and other potential opportunities to extract value from the assets,” says Fortescue CEO Nev Power.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.