Cazaly Resources Ltd announced the finalisation of a Memorandum of Understanding (MOU) with HWE Mining Pty Ltd for the development of its Parker Range iron ore project in Western Australia.

The joint venture between Cazaly and HWE is conditional upon completion of due diligence and board approval from both companies. Other condidtions include Cazaly receiving an economic allocation of port access with Fremantle Ports for the export of iron ore via Kwinana bulk Terminal and a binding off-take agreement.

The MOU provides a framework for engineering, procurements, construction, operate and maintain (EPCOM) contracting model for the mining and associated contracting required to deliver ore to the railhead, co-participation in the current definitive feasibility study, a defined reference case for the development incorporating project capex and opex, and a development schedule and cash flow forecast based on the reference case. Further, the MOU provides an option for HWE to acquire minority unincorporated joint venture interest, up to 20 per cent, in the Parker Range iron ore project.

"This is a major step forward for the potential development of the Park Ranger iron ore project as it provides a framework for an EPCOM contract which will significantly reduce the capital expenditure requirements of the company," said Cazaly in a statement to the ASX.

The Parker Range Iron Ore Project lies approximately 15 km southeast of Marvel Loch in the Yilgarn Iron Ore Province and approximately 60 kilometres by road south of the Perth-Kalgoorlie railway. The project is estimated to cost $78 million as initial capital with further $28 million for test work in the third year of mining.

Cazaly shares were placed into a trading halt yesterday, pending an announcement ''regarding the finalisation of an agreement with respect to the development [of] the Parker Range iron ore project."