NDMC will subscribe for around $A19 million in equity for a 50% stake in Legacy. The $19 million will be for a minimum allocation of around 238 million shares.

The final number of shares to be issued and the subscription price is subject to total shares on issue at the time the formal subscription agreement is finalised. The number of shares to be issued will also be subject to the conversion of any options currently on issue.

The formal share sale agreement is subject to Legacy shareholders’ and Foreign Investment Review Board approvals.

News of the deal didn’t bode well for Legacy’s share price, which dipped as much as 7c to an intraday low of 12c in morning trade, with more than 8.3 million shares changing hands by 11:40am AEST.

The Indian outfit plans to use the junior as its Australian vehicle to acquire large-scale bulk commodity projects.

NMDC is a government-owned public enterprise under the control of the Ministry of Steel and is India’s single largest iron ore producer, churning out 30 million tonnes of metal per annum.

Legacy’s chief executive officer Sharon Heng said the investment represented NMDC’s first investment outside of India.

“After conducting extensive due diligence on Legacy, NMDC have concluded that we are the ideal entry point for them into the Australian iron ore and resource sector,” Heng said.

“NMDC is not only providing Legacy with funding through the placement but their presence on the register will create additional opportunities for Legacy, such as the acquisition and divestment of various projects.”

Heng said Legacy had been inundated with offers to joint venture and fund numerous resource opportunities in gold, iron ore and coal since announcing the memorandum of understanding with NMDC in May.

“With NMDC on the register and significant financial backing, upon completion of the placement Legacy will be in a position to actively acquire such projects to further increase shareholder value,” Heng said.

Following the cash injection from NMDC, Legacy plans to spin-off some assets into a new entity to be listed on the ASX.

Legacy said the proposed restructure was aimed at turning Legacy from an explorer into a miner.

Legacy’s main asset is a 60% stake in the Mount Bevan iron ore project in Western Australia’s central Yilgarn. Mount Bevan hosts an inferred resource of 617Mt grading 32.1% iron.

Fellow Australian iron ore explorer Hawthorn Resources holds the balance.

A shareholder meeting to approve the placement to NMDC is scheduled for November. FIRB approval is also being sought.

Shares in Legacy recovered some ground to 13.5c in late morning trade.