Alderon Announces Off-Take Transaction With Glencore Alderon Iron inks deal for sale of Kami production with Glencore
11:45 am by Deborah Bacal
Glencore will receive all of the annual production from Kami that has not already been allocated to joint venture partner Hebei Iron & Steel Group, Alderon said, accounting for 100 percent of the property's production. ()(NYSE MKT:AXX) has signed an off-take agreement with London-listed Glencore (), one of the world's biggest natural resource companies, for production from its Kami project.
Under the terms of the deal, Glencore must purchase, upon the start of commercial production at the site, 40 percent of the actual annual production from Kami, up to a maximum of 3.2 million tonnes of the first 8 million tonnes of iron ore concentrate produced every year.
Glencore will receive all of the annual production from Kami that has not already been allocated to joint venture partner Hebei Iron & Steel Group, Alderon said, accounting for 100 percent of the property's production.
The agreement will continue until Glencore has received 48 million tonnes of iron ore concentrate from the project, which is expected to take 15 years from the start of commercial production.
"Glencore is one of the world's largest natural resource trading companies and in Alderon's view, this commitment demonstrates the quality of the Kami Project and its management team," said executive chairman of Alderon, Mark J. Morabito.
With this latest offtake, chief executive Tayfun Eldem said Alderon has bolstered its chances of obtaining the financing necessary to begin construction at Kami.
"The offtake arrangement with Glencore gives Kami concentrates global exposure and the multi-year agreement serves as another significant de- risking milestone for the Kami project," Eldem added.
Alderon said Tuesday that the market price paid by Glencore will be based on the monthly average price for iron ore sinter feed fines quoted by Platts for 62 percent iron content, less a discount equal to 2 percent of such quoted price.
The Kami project is owned 75 percent by Alderon and 25 percent by Hebei Iron, China's largest steel producer, and is surrounded by four producing iron ore mines. Its port handling facilities are located in Sept-Iles, the leading iron ore port in North America.
The company earlier this year obtained the surface and mining leases for the project, allowing Alderon to begin construction once financing is secured. It also appointed Ian R. Ashby, the former president of 's iron ore unit, to its board of directors in May in preparation for the upcoming development.
Shares of Alderon advanced 5.4 percent on Tuesday, to C$1.36 in Toronto.