Atlas locks in final iron offtake deal

Junior iron ore producer Atlas Iron has signed the last of its available iron ore into a long-term offtake agreement with an unidentified Chinese steel mill.

Atlas has signed an agreement to supply 20 per cent of the iron ore produced at its Pardoo mine in the Pilbara to the steel mill over a three-year period to March 2012.

The company now has in place four offtake agreements with Chinese mills for 100 per cent of the product from Pardoo over the next three years

Pardoo is 75 kilometres by road from Port Hedland and is expected to produce about one million tonnes of iron ore during the first year of operation before ramping up to three million tonnes.

Atlas said it will soon start offtake negotiations for its second Pilbara iron ore operation, Abydos.

Shares in Atlas were unchanged at $1.255 at 15:33 AEDT.

The announcement is below:

Atlas Iron Limited (ASX Code: AGO) is pleased to announce that it has entered into a new long term off-take agreement with a medium-sized Chinese steel mill. This off-take agreement accounts for 20% of iron ore that will be produced from its 100%-owned Pardoo DSO Project for the three year period to 31 March 2012.

The execution of this new off-take agreement follows Atlas' three other off-take agreements in respect of 80% of Pardoo DSO, announced on 16 March 2009 and in December 2008. As a result, Atlas has now entered into four off-take agreements for 100% of its Pardoo DSO product for the next 3 years.

Key terms of this new off-take agreement are the same as those announced on 16 March 2009 and are as follows:
- Price referenced to the long term benchmark, with pricing relativity achieved reflecting the strong competition to secure access to Atlas DSO tonnage;

- An adjustment mechanism which applies only in the event that spot prices and benchmark prices materially diverge. Once activated this mechanism serves to adjust the sales price mid-way to the spot price, in order to maintain the fairness of contract pricing to both parties; and

- Ore sold on a delivered basis, with freight to be arranged by Atlas at spot rates and reimbursable by the customers at cost and covered under the terms of the Letter of Credit.

The first shipment under this new off-take agreement is expected to be completed by the end of June 2009. Ore for the initial shipments under this off-take agreement will be sourced from the Bobby and Alice deposits at the Pardoo Project, where mining is currently underway. This final off-take agreement as with the two off-take agreements announced on 16 March 2009 has been executed after careful evaluation of the extremely competitive bids received from trading groups and steel mills.

"Atlas' in-house marketing team comprising Mark Hancock and Daniel Taylor have achieved an excellent result in a very short period of time." commented Atlas Managing Director, David Flanagan. "We look forward to building those relationships as we continue to grow our Pilbara production," he added. "Pardoo production is now sold out"

Atlas will shortly commence negotiations with interested trading groups and steel mills for sales of product from the Company's Abydos DSO Project.