Atlas Iron will resume mining at its Mount Webber mine in July after signing a deal with BGC Contracting.
The Mt Webber project is expected to produce iron ore at a rate of 6Mtpa for a mine life of more than eight years.
Under the terms of the deal, Atlas and BGC are targeting mining cost savings of 10-12 per cent.
This means Mt Webber’s costs will be similar to those at Atlas' other two mines – Wodgina and Abydos- with a break-even price of $US50 per tonne.
Moving away from the contractor collaboration model Atlas struck with contractors at its other mines, under the Mt Webber contract the rates paid to BGC will not rise in line with the iron ore price and BGC will not share in the net operating cash flow from Mt Webber.
Atlas will instead pay BGC between $17.1 million and $19.6 million in shares and/or cash to cover termination costs associated with the Wodgina mining contract, suspension, remobilisation and other costs for the Mt Webber mine, with discounts applicable for the portions paid in cash.
Atlas has also agreed to pay BGC an option fee of $3.45 million in Atlas shares representing $3 million credit against the future purchase of the Mt Webber crushing and screening plant.
The agreement with BGC comes after a string of similar deals Atlas has made with contractors which has enabled the company to restart mining.
Atlas announced it would mothball its three Pilbara mines in April in response to the low price of iron ore.
However contractors McAleese, MACA and Qube stepped in to help cut costs and keep the miner afloat, with mining now back underway at both Wodgina and Abydos.
Atlas Managing Director Ken Brinsden said the resumption of production at Mt Webber was another key step in the strategy to ensure Atlas has a robust financial future.
“With Mount Webber operating we will once again have a strong, diversified production base but with markedly lower costs,” Brinsden said.
"We are firmly on track to achieving our key goals of low costs, strong margins and healthy cash flows, backed by a stronger balance sheet that will enable the company to withstand periods of price volatility.”