Precious Metals signs $35m LNG supply agreement

West Perth-based Precious Metals Australia Ltd has signed agreements worth $35 million over three years for a supply of natural gas to its Windimurra vanadium mine, the company announced today.

The full text of a company announcement is pasted below

Precious Metals Australia (ASX:PMA) has announced it has secured supply of natural gas from the North-West Shelf to its world-class Windimurra vanadium mine, under development 600km north east of Perth.

PMA has signed agreements worth $35 million over three years for the purchase and delivery of natural gas to the Windimurra mine, making it the largest gas supply project in the Mid West. The supply agreement includes an option to extend for a further three years, providing longer-term security for the project.

PMA Executive Chairman Michael Kiernan said this was a milestone gas supply agreement, which provided long-term security for the operation of this project.

"Gas represents the largest single operating cost for this project, and execution of these contracts provides further confidence for the project as it moves from the detailed design to the construction and operational stage," Mr Kiernan said.

"With finance and funding well advanced, senior management positions filled and core mining infrastructure in place, PMA is poised to commence production at Windimurra mine early in 2008," Mr Kiernan said.

A Part Haul Shipper contract for the transmission of gas from the North West gas field to the MidWest Gas Pipeline takeoff via the Dampier to Bunbury Natural Gas Pipeline has been signed with the pipeline operator, DBNGP (WA) Transmission Pty Ltd. The contract for a term of 15 years secures Windimurra's place in the Stage 5A expansion of DBNGP due for completion in March 2008.

A Gas Transportation Agreement has also been reached with Horizon Power and APT Pipelines (WA) Pty Ltd for the transmission of gas from the DBNGP to the Windimurra Vanadium mine, via the Mid West Pipeline, for a term of 15 years. This 365km gas pipeline was originally built to facilitate development of Windimurra in 1999.

All gas purchase and delivery agreements have been conducted through PMA's 90% subsidiary, Windimurra Vanadium Pty Ltd. The gas will be used to fire the existing rotary kiln at Windimurra, and to power the 18.5MW gas turbine power station. The first three of four gas turbines being built for the Company by Solar Turbines of USA, will leave the factory next month.

Gas is an essential fuel for the Windimurra vanadium mine, and its use is unique in the vanadium industry. Roasting the ore concentrate with natural gas has previously been shown at Windimurra to yield a higher purity vanadium product than is produced by competitors who use pulverised coal.

PMA is currently redeveloping the Windimurra mine, with first production in early 2008. The mine is expected to produce 6,200 tonnes per annum of ferrovanadium, which will represent approximately 8% of the world market.