Atlas Iron has struck a deal with lithium developer Pilbara Minerals to purchase up to 1.4 million tonnes of direct shipping lithium ore over the next 15 months.
Under the agreement Pilbara will mine the ore at its Pilgangoora project, 120 kilometres south-east of Port Hedland, with Atlas taking control of the ore at the mine gate.
Atlas will transport and process the ore using its existing infrastructure at its Mt Dove crusher and Utah Point port facilities at Port Hedland.
First export sales are scheduled for the June quarter next year with Atlas saying that the deal should provide an operating margin of between $15 and $20 per tonne.
Atlas will also make a prepayment of $US3 million ($4 million) to Pilbara as part of the agreement.
Pilbara said in a statement to the ASX today that Sinosteel is currently contemplating an offtake agreement with Atlas for up to 1.5 million tonnes.
Atlas managing director Cliff Lawrenson said the agreement was a significant step forward for the company.
“We expect to generate strong free cashflow for Atlas in return for minimum capital outlay,” he said
“It enables us to leverage our existing assets, including the crusher and port facilities, and utilise our corporate infrastructure.
“We are pleased to find an opportunity to create value through common sense infrastructure sharing in the Pilbara.
“This is the first revenue earning agreement we have reached as part of our diversification strategy and it will not be the last.”
Pilbara managing director Ken Brinsden said the agreement was consistent with the company’s desire to support growth of its lithium-ion supply chain.
“From Pilbara’s perspective, this is an opportunity to generate upfront revenue and cash-flow in the early stages of commissioning and ramp-up of the Pilgangoora Project, without detracting from our core focus on building a longterm spodumene concentrate business,” he said.
“The ability to generate early cash-flow is a significant bonus for any resource company in the commissioning and ramp-up phase, and this arrangement with Atlas allows us to leverage off Atlas’ established infrastructure and logistics chain to do so with minimal additional capital outlay.”
The agreement is subject to conditions including port approvals and Pilbara obtaining a waiver from Global Advanced Metals.
Global is one of the world’s leading suppliers of tantalum products and also trades tantalum on international markets, produces and supplies tin and manufactures niobium metal products.
Pilbara announced today that it has signed offtake agreements with Global for 100,000 pounds of tantalum concentrates at Pilgangoora over the next two years.