IMX Resources (ASX: IXR) has taken steps to sell its 19th shipment of magnetite ore from the Cairn Hill Phase 1 project in South Australia to an existing spot shipment customer.
The company had anticipated the resumption of magnetite ore deliveries to joint venture partner Taifeng Yuanchuang International Development Company, starting with the 19th shipment, following the modification of its processing plant at Bayuquan in China and reduction of its inventory of stockpiled ore.
However, Taifeng advised the joint venture operating entity, Termite Resources NL, that it is unwilling to pay the Phase 1 Life of Mine sales contract pricing for the shipment and has requested renegotiation of the terms of the contract.
Taifeng has also advised the joint venture that as a result of continuing bottlenecks at its processing plant it cannot take all of the ore it has contracted to purchase under the contract.
IMX Resources managing director Neil Meadows said the company is working with Taifeng to resolve the issues in an equitable and timely manner.
“We have had strong interest from other parties in our product and we are confident that we will have long term offtake agreements to support the operation in place by the end of the third quarter of the 2012 financial year,” he said.
The joint venture has begun negotiations of long term contracts with alternative parties for the part of the ore production from Cairn Hill that Taifeng has indicated it will not take.
Based on the success of the trial shipments and interest from additional potential customers, the joint venture expects that it will readily secure alternative long term contracts at market related pricing.
While the softening of iron ore and copper prices in recent months has seen the pricing of Cairn Hill magnetite copper ore under the Phase 1 Life of Mine sales contract reduce by 25%, the operations at the mine site are performing at designed capacity with cash operating costs free on board trending towards the target of A$75 per tonne with opportunities for further improvement already identified.
IMX’s interest in the Cairn Hill JV is held through a direct 51% interest in the joint venture company Outback Iron, which holds the Cairn Hill mining lease through subsidiary Termite. Taifeng has the remaining 49% interest in Outback.
Importantly, the Cairn Hill mine, 55 kilometres south-east of Coober Pedy, is situated close to the Darwin-Adelaide railway.
Phase 1 is a unique magnetite iron-copper-gold direct shipping ore project. The ore produces a premium coarse grained magnetite product, with a clean saleable copper-gold concentrate.
A Phase 2 Resource has been announced and the joint venture project group is currently accelerating the development program.