Strategic Minerals PLC (LON:SML) has replaced a contract to supply iron ore to private group Galvin with a new larger deal with an unnamed private company.
The new contract is for 400,000 tons of magnetite from the Cobre facility in New Mexico over several years at market prices.
Galvin had agreed to take 350,000 tons at market prices, but failed to meet the deadlines to complete the deal.
Strategic said the new customer had paid a US$10,000 deposit and will lodge a further US$250,000 by 14 April.
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The new contract calls for a minimum purchase of 4,000 tons per month starting on 1 June.
Strategic added that this contract should double annual sales from Cobre without affecting the effective net profit margin of between 40% to 45% of sales revenue.
The contract will terminate if, at any time, Strategic loses access to the magnetite stockpile at Cobre.
John Peters, managing director of Strategic Minerals, said: "Management have a high confidence that this contract will progress and note that it is, compared to the agreement we have just terminated, for a greater total quantity and has doubled minimum monthly purchases.
“We will inform the market when we receive the solicitor's confirmation that the $250,000 security deposit has been lodged into their trust account and that they hold an irrevocable order to release the funds upon a claim by Southern Minerals Group [Strategic's subsidiary].
“The impact of the contract on the company is not to be underestimated as it is likely to materially boost the expected profitability of the Cobre operation in 2017."