IronClad Mining offtake agreement secures half of Wilcherry Hill annual iron ore production

IronClad Mining (ASX: IFE) has secured a significant offtake agreement for iron ore from its Wilcherry Hill project in South Australia.

The four year offtake agreement with Hong Kong-based resources industry investment group New Page Investments is for up to 50% of annual iron ore production from Wilcherry Hill.

In January 2012, New Page took a $6 million share placement in IronClad, to finance start-up works at the Wilcherry Hill site. This equates to a 9.02% interest in IronClad.

This latest offtake agreement follows a similar but separate offtake agreement signed with a Singaporean trading company in 2011.

IronClad executive chairman Ian Finch said the new offtake agreement paved the way for heightened construction activity at the mine.

“Under the terms of the new agreement, New Page Investments must pay IronClad 95% of the agreed value of iron ore leaving via ship from our Lucky Bay port facility, within 30 days of that ship departing,” he said.

“It is another most welcome development for IronClad and its shareholders.”

On track for iron ore production

Wilcherry Hill is on track for maiden production in the March quarter of 2012, with the first shipment of iron ore to be exported to Chinese customers in the June quarter.

The first two years of production from Stage One of mining has been sold to the Chinese steel mills under a comprehensive sales contract and marketing agreement.

The first year of production involves 1 million tonnes per annum of direct shipping ore for export to Asia, increasing up to 2 million tonnes per in the second year.

A Feasibility Study for Stage One of the project established that, with an average iron ore price of $140 per tonne free on board (net of freight charges) into China and initial operating costs of around $85 per tonne, the project would provide IronClad with margins of $50 per tonne and an operating cash flow of around $80 million per year at full production during the first stage.

Stage Two involves an increase in production to 5 million tonnes of iron ore concentrate per annum.

Wilcherry Hill is a joint venture operation between IronClad (80%) and its associated company, Trafford Resources (ASX: TRF) (20%).

Originally published at: http://www.proactiveinvestors.com.au/companies/news/24787/ironclad-mining-offtake-agreement-secures-half-of-wilcherry-hill-annual-iron-ore-production-24787.html