Shares in Brockman Resources were higher after the company signed a non-binding agreement with China's Sinosteel for the purchase of ore from Marillana ore project in the Pilbara, and possible investment opportunities.
Shares in Brockman Resources were higher after the company signed a non-binding agreement with China's Sinosteel for the purchase of ore from Marillana ore project in the Pilbara, and possible investment opportunities.
Both companies signed a memorandum of understanding for the purchase of up to 10 million tonnes each year over an initial five-year period.
In addition, the agreement considers possible investment options by Sinosteel in Marillana.
News of the agreement sent Brockman's shares up 29 cents to a high of $4.05 before easing to $3.91 at 11:34 AEST.
The announcement is below:
Brockman Resources Limited (ASX: BRM - "Brockman" or "the Company") has taken another key step towards becoming a leading Australian mid-tier iron ore producer after signing a landmark MOU with China's largest iron ore importer, Sinosteel Australia Pty Ltd ("Sinosteel"), for the purchase of up to 50% of future production from its flagship Marillana Iron Ore Project ("Marillana Project") in the Pilbara region of Western Australia.
Brockman today signed a non-binding Memorandum of Understanding ("MOU") with Sinosteel for the purchase of a maximum of 10Mtpa of production over an initial 5-year off-take period. Significantly, the MOU also contemplates the parties discussing wider strategic investment options by Sinosteel in the Marillana Project.
Sinosteel Corporation is one of China's largest State-owned enterprises and its Australian subsidiary, Sinosteel Australia Pty Ltd, has played a key role in the Pilbara iron ore industry since entering the Channar Mining Joint Venture with Rio Tinto in 1987. Sinosteel was China's leading importer of iron ore in 2009, importing over 40 million tonnes for Chinese steel-making markets.
The landmark MOU - the first agreement signed by Brockman in respect of off-take from the Marillana Project - provides a strong foundation for completion of the Definitive Feasibility Study ("DFS") and project development. The DFS is currently more than 60% complete and is scheduled to be completed during Q3 2010.
The signing of the MOU confirms the technical acceptance of Marillana Project ore, following the recent release of key metallurgical test work results confirming that the Marillana detrital ore can be upgraded to a final product grade of between 60.5% and 61.5% Fe. The final product specification is comparable with direct shipping hematite ore being mined from other significant Pilbara iron ore projects.
"We are delighted to have signed this MOU with such a well-known and credible off-take partner for the Marillana Project," said Brockman's Managing Director, Mr Wayne Richards.
This provides strong evidence, not only of the technical acceptance of Marillana Project ore, but also the growing level of support from key global groups for the successful development of the Marillana Project.
"We expect this to be the start of a very positive strategic alliance for the Company, as it aligns Brockman with an extremely experienced and well resourced group with a long track history in Western Australia of successful trading and investment," he added.
"The MOU, while assisting Brockman greatly with the completion of our impending DFS and providing a framework for the finalisation of an off-take agreement for a significant proportion of the Marillana Project's planned production, also allows for wider strategic investment discussions between the two groups, without limiting the possibility of other corporate or joint venture scenarios," said Mr Richards.
"We are pleased to have signed this MOU with Brockman and look forward to finalising the final off-take agreement," said Sinosteel Australia's Managing Director, Mr Li Ying. "Our company is keen to cooperate and partner with Australian companies with credible projects seeking to leverage our capability to supply raw materials for China's steel industry, whether this is iron ore, manganese, chrome ore or coal."
