BC Iron Limited (ASX: BCI)
ASX RELEASE
11
February 2009
BC IRON secures landmark long-term
OFF-TAKE AGREEMENT
for nullagine iron ore
HIGHLIGHTS
?
Agreement
with Australian-based metals trading and investment house Tennant Metals.
?
Tennant
Metals to act as agent and/or principal in the FOB sale of 25% of BC Iron?s
future iron ore production (commencing at 1.5Mtpa).
?
Arrangement
reduces counter-party risk to BC Iron ? payment to be made immediately on
delivery of ore, through an Australian financial institution.
?
Off-take
commencing from start up of production in 2010 for at least five years.
?
High-quality,
low-contaminant ore with ?First Class? sintering characteristics.
?
Tennant
Metals is a privately owned, Australian-based strategic metals trading and
investment house.
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.
- ENDS -
Released by:
On behalf of:
Nicholas Read
Mr Mike Young
Read Corporate
Managing Director
Telephone: +618 9388 1474
BC Iron Limited
Telephone: +618 9324 3200
About BC Iron Limited
BC Iron
Limited (ASX: BCI) is an emerging iron ore producer focused on Western
Australia?s world-class Pilbara region. The Company?s
core asset is the 100%-owned Nullagine Project, an extensive tenement portfolio
which is strategically located 140km north of Newman proximal to Fortescue
Metals? Chichester operation.
The Nullagine
Project hosts a Direct Shipping Ore (DSO) resource of 46Mt @ 57% Fe (64.8% Fe)
within an overall Channel Iron Deposit (CID) resource of 80Mt @ 54% Fe. BC
Iron?s competitive advantage is that the Nullagine resource comprises an
outcropping, low contaminant ?first class? sinter feed that is located close to
accessible infrastructure.
BC Iron has
completed a successful Scoping Study on a start-up DSO operation at Nullagine
and, on the strength of this, moved quickly into a Feasibility Study. This
study, which is currently underway, is examining the prospect of commencing
commercial operations at the Bonnie Creek CID Project in 2010.
The Company recently entered into
a long-term off-take agreement for 25% of future iron ore production from the
project.
Subject to the
execution of a rail haulage or access agreement with Fortescue, the Company
will be capable of transporting its ore to Port Hedland, 260km to the north
west, for export ? positioning it to rapidly transform
the project into production and cash flow.
While still
subject to ongoing work, BC Iron?s estimated capital expenditure requirement
for the mine development is approximately A$20-30 million with a forecast
operating cost of approximately A$40/tonne. The operation is scheduled for commissioning
in early 2010 at an initial rate of 1.5Mtpa, ultimately ramping up to 5Mtpa.
Key Statistics
Shares on Issue: 59.4 million
Cash & equivalents: December 31, 2008 - $5.1M
Board and Management: Tony Kiernan ? Chairman
Mike Young ? Managing Director
Garth Higgo ? Non-Executive Director
Terry Ransted ? Non-Executive Director
Steven Chadwick ? Non-Executive Director
Major Shareholders: Consolidated Minerals 26%
Alkane Resources Ltd 15%
UBS Wealth Management Aus. Nom 5%
About
Tennant Metals
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.
The Company is one of Australia?s
oldest metals trading house and was originally part of Tennant Limited, which
was established in 1966 as a trading subsidiary of the Renison Gold Fields
Group. Since 1997, Tennant Metals has been privately owned and has had a strong
Asian focus with staffed offices in Beijing and Taipei
complementing its offices in Sydney and Perth.
Tennant Metals has an in-depth
understanding of the various components of metals trading including the
logistics chain, the sourcing and sale of the physical product, the hedging of
the risks associated with the underlying product, and the financing of the
transaction.
The off-take agreement with BC
Iron represents the first major transaction for Tennant Metals? recently
established Western Australian office and is a flagship deal for the group as
part of its expansion into the metallurgical bulk commodities area. Tennant
Metals? Perth office is managed by experienced
metals trader, Justin Boylson, who previously had several successful years with
Sinosteel Australia.
Sinosteel is China?s
largest trader of iron ore and bulk metallurgical commodities.
With its extensive networks and
agency relationships worldwide, Tennant Metals will provide significant support
for BC Iron in the marketing of its premium quality ore, as well as providing
strategic corporate and treasury services, if and when required.