BC Iron yesterday announced a $53.8 million off-take agreement with a Hong Kong-based industrial and trading company for its Nullagine Joint Venture (NJV) iron ore project with Fortescue Metals.
Under the terms of the agreement, the project will deliver 20 million tonnes of iron ore to the off-take partner over the eight-and-a-half years.
The $53.8 million worth of pre-payments will go towards having the project operational by late-2010.
The first $16 million tranche will be drawn down in December this year.
According to BC Iron managing director Mike Young, the agreements would not only underpin project finance, but also establish long-term relationships with customers.
“We are extremely pleased to have secured not only our first off-take agreements but also a significant project finance facility on very attractive terms,” he said.
“This will allow us to push ahead with development of the project, without the complexity that comes with conventional finance agreements.”
As per the terms of the agreement, iron ore pricing will be related to the annual benchmark reference price.
If there is no benchmark in place, the ore will be priced according to a pre-agreed index system.
BC Iron will issue the Hong Kong company with a total of eight million options with a two year term.
Six million of the options will be priced at $1.35, while the remaining two million will be $1.50.