11/02/2009 - 11:50

BC Iron secures first offtake deal

11/02/2009 - 11:50

Bookmark

Upgrade your subscription to use this feature.

BC Iron has secured its first offtake agreement for its Nullagine project in the Pilbara, with the contract starting from 2010 over a minimum five-year period.

BC Iron secures first offtake deal

BC Iron has secured its first offtake agreement for its Nullagine project in the Pilbara, with the contract starting from 2010 over a minimum five-year period.

Australian-based, specialist metals trading and investment house Tennant Metals has agreed to act as agent for the free on board sale of 25 per cent of iron ore produced at Nullagine.

BC managing director Mike Young said the arrangement is structured to minimise counter-party risk and provides immediate payment for ore on delivery through an Australian bank.

"This is a very attractive arrangement at a time of uncertainty and a reflection of the quality of our product and highly competitive position within the Australian iron ore sector," he said.

The price of ore will be taken from the long-term benchmark iron ore price, with adjustments for the quality of the Nullagine iron ore.

BC is currently undertaking a feasibility study on a 1.5 million tonne per annum start-up operation. The study is due for completion by the end of June.

Shares in BC Iron were up four cents to 40c at 13:52 AEDT.

 

 

The announcement is below:

 

Australian iron ore company BC Iron Limited (ASX: BCI - "BC Iron") is pleased to announce that it has entered into a long-term off-take agreement for 25% of future iron ore production from its 100%-owned Nullagine Iron Ore Project in the Pilbara of Western Australia.

The agreement is with Tennant Metals Pty Ltd, an Australian-based, specialist metals trading and investment house (see below). Under the arrangement, Tennant Metals will act as agent and/or principal for the Free on Board (FOB) sale of 25% of iron ore produced at Nullagine for a minimum five year period from the commencement of production anticipated to be in early 2010.

The price of the ore will be referenced to the long-term benchmark iron ore price, with appropriate adjustments for the premium quality nature of Nullagine iron ore. Sinter test work carried out independently in China during 2007 by a large steel company found that BC Iron's fines ore can be categorised as 'First Class' in terms of its sintering characteristics.

This is of particular importance as it differentiates BC Iron's product from that of others and adds exceptional value by enhancing sinter quality. Furthermore, the test work highlighted the ultra-low phosphorus levels in BC Iron's ore.

The agreement with Tennant Metals represents the first third party off-take agreement entered into by BC Iron and marks a further significant milestone for the Company towards development of the Nullagine Project.

Last month, BC Iron announced a 64% increase in high-quality Direct Shipping Ore (DSO) resources for the Bonnie Creek CID Project at Nullagine to 46.2Mt grading 57.0% Fe (64.7% calcined Fe) within an updated global resource totalling 80.2 Mt grading 54.0% Fe (61.9% CaFe) of mineralised Channel Iron Deposit (CID).

BC Iron is currently undertaking a Feasibility Study on a 1.5Mtpa start-up operation at Bonnie Creek which is due for completion during the first half of 2009. First production is targeted for 2010. The Bonnie Creek CID Project is located close to existing infrastructure including Fortescue Metal Group's (FMG's) Cloud Break and proposed Christmas Creek operations.

Tennant Metals is a well-established and highly respected Australian-based trading and investment house specialising in the physical merchanting of a range of refined metals, ores, concentrates and metallurgical bulk commodities globally.

Summary

BC Iron Managing Director Mike Young said the off-take agreement with Tennant Metals represented a major positive milestone for the Company and reflected the premium quality of the Nullagine ore product and its potential to attract very high levels of market interest.

"We are very pleased to have struck this landmark ore sales agreement with a highly respected Australian company with the international trading experience, proven track record and global presence of Tennant Metals," Mr Young said.

"Tennant Metals is managed by a group of outstanding, committed individuals, and it represents a major plus for the Company and the Bonnie Creek CID Project to have forged a long-term partnership with them for the marketing and sale of iron ore commencing from early next year."

The off-take agreement is structured in a way that minimizes counter-party risk and provides immediate payment for ore on delivery via an Australian bank. Mr Young said "This is a very attractive arrangement at a time of uncertainty and a reflection of the quality of our product and highly competitive position within the Australian iron ore sector."

"We are very happy to have Tennant Metals on the team as we complete the Feasibility Study on the Bonnie Creek CID Project and move towards production."

"With last month's resource upgrade, the Feasibility Study and the signing of this important agreement today, things are rapidly falling into place to press ahead with our development plans as quickly as possible," he said.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options