AFTER searching for suitable buyers for its distinctive magnetite-copper direct shipping ore (DSO), IMX Resources has signed a life of mine (LOM) contract with Vingo Resources for the latter
to purchase 50 per cent of all ore produced from IMX’s 51 per cent-owned Cairn Hill mine in South Australia.
Cairn Hill is a joint venture between IMX (51 per cent) and Taifeng Yuangchuang International Development Company (49 per cent); it produces about 1.7 million tonnes per annum of magnetite-copper DSO.
Prior to this latest contract, Taifeng had been purchasing Cairn Hill ore under a LOM arrangement.
However, in early January this year, Taifeng advised IMX it would not pay the set price for the 19th shipment of ore and requested a renegotiation of contract terms.
Taifeng also stated that bottlenecks in its processing plant meant that it would not be taking the amount of ore it had originally agreed to buy. Since then, Perth-based IMX has been searching for
suitable offtake partners and the new contract with Vingo has comparable commercial terms to the previous Taifeng arrangement.
The contract is based on industry-standard iron ore and copper benchmark prices. In addition to the LOM contract with Vingo, IMX is also in advanced negotiations with other customers to sell
the remainder of Cairn Hill’s magnetite-copper DSO. “The life of mine sales contract with Vingo will remove much of the uncertainty associated with the Taifeng LOM contract, which has weighed heavily on market sentiment towards IMX over the past six months,” IMX managing director Neil Meadows said.
“We have achieved pricing similar to the Taifeng LOM contract and with the implementation of the revised work plan, we expect Cairn Hill to generate EBIT [earnings before interest and tax] of $40 to $45 million per year going forward.
“IMX’s share of this will underpin our ambitious growth strategy,” he added.
By Lorna Seatter