Mount Gibson Iron Ltd signs offtake agreement for Iron Hill iron ore
25 November 2016
Mount Gibson Iron Ltd (ASX:MGX) has entered into an offtake agreement with Sinogiant Steel Holdings to sell one quarter of the first year’s production planned from its Iron Hill iron ore deposit.
The Iron Hill deposit is near Mount Gibson’s existing Extension Hill mine in the mid-west of Western Australia.
Sinogiant is one of China’s largest private metallurgical companies with a total annual steel production capacity of 10.5 million tonnes per year.
Mount Gibson is in advanced discussions with other prospective customers with a view to securing total offtake commitments for up to 80% of available annual production from the Iron Hill deposit.
Consistent with existing sale arrangements for Extension Hill, Mount Gibson intends to market the uncommitted proportion directly to spot customers on a cargo by cargo basis.
The company aims to start development of the Iron Hill deposit in time to commence sales when remaining stockpiles of standard hematite from the Extension Hill open pit are exhausted in the first half of calendar 2017.
Iron Hill represents a low-capital cost production extension opportunity for the company’s mid-west business.
The development capital costs are expected to total $2-3 million, given Iron Hill’s location just 3 kilometres south of the recently depleted Extension Hill open pit, which has existing mine facilities.
Iron Hill has total resources of 8.8 million tonnes grading 58.3% iron.Mount Gibson’s guidance for 2016-17 is for total ore sales of 2.8 – 3.1 million tonnes.