Strategic Minerals PLC (LON:SML) has potentially picked up a substantial new customer for its iron ore tailings business, Cobre, in New Mexico.
Private group Galvin Investment Company (GIC) will take up to 350,000 tons of magnetite (iron ore) at a market based price over several years, subject to availability.
If implemented, the contract would effectively double annual sales from Cobre, while maintaining an effective net profit margin at 40% to 45% of sales revenue.
Cobre racked up sales of US$1.55mln from 25,385 tons of magnetite in 2016, but the contract is for a minimum of 2,000 tons per month, which would raise volumes to over 50,000 tonnes.
WATCH: Cobre deal could be a 'game changer' ...
Maximum supply, if available, would be 6,000 tons per month.
Before the contract becomes effective, GIC must provide a US$100,000 Letter of Credit from an acceptable bank and John Peters, Strategic Minerals’ managing director said he was being cautious until the full contract was signed.
"While we are delighted with the prospect of undertaking this contract with Galvin Investment Company, the Board wishes to emphasise the need to temper expectations and for caution to be applied until the security Letter of Credit is provided and sales commence.
“This process may take up to 30 days before the contract would effectively commence.”
The contract will terminate if, at any time, Strategic loses access to the magnetite stockpile.
Strategic recently extended its contract over the magnetite tailings for another year and is in talks over a longer tenure.
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