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Iron ore producer Bellzone Mining plc (LSE:BZM) has signed an offtake agreement with commodities giant Glencore International plc (LSE:GLEN) to supply all its iron ore produce in Guinea, the company said today.
In a statement, the company said all of its 50% share in the Forecariah Joint Venture (FJV) project in the West African country will be supplied to Glencore for all the life of the mine, giving the company a sure buyer for all future resources mined.
That covers about eight years of production based on internal estimates, according to Bellzone’s Chief Executive Nik Zuks, who is about to leave his post in two weeks’ time.
Production from the JV commenced in May 2012 with the first iron ore produced expected to be exported by the fourth quarter of this year, according to the company’s timeline.
The company targets to achieve four million tonnes per annum (mtpa) production with a planned maximum output of 10 mtpa by 2014.
Pricing of the steelmaking ingredient, which is set at 58% specification, will be based in an incentivised scheme between both parties and tied to the Platts IDOEX CFR China benchmark.
“The offtake agreement affords both parties the structure to establish the FJV product in the market at best possible price,” Mr. Zuks stated.
In addition, Bellzone’s partner in the JV, China International Fund Limited, will have the option to also export to Glencore the other half of the project’s production.
Glencore will also provide US$15 million as prepayment drawdown facility, provided Bellzone produces 750,000 wet metric tonnes or five vessels of iron ore.
Shares of Bellzone traded 3.3% higher than yesterday’s close to 15.50 pence, after rising up to 16.53 pence early in the morning on te Alternative Investment Market of the London Stock Exchange.
Company Spotlight
Bellzone Mining plc is a Jersey-incorporated West Africa-focussed iron ore exploration and development company. The company’s flagship project is the Kalia Mine, also located in Guinea, with a JORC-compliant resource of about 6.16 billion tonne magnetite.
