August 7, 2008
August 7th (The Sydney Morning Herald) – Atlas Iron Ltd has entered into a joint-venture agreement with Fortescue Metals Group Ltd (FMG) for Atlas’s Abydos project in Western Australia’s Pilbara region.
The joint venture covers a tenement over which Atlas owns the iron ore rights. Atlas also said that it was the first company to seal a port access deal with Fortescue for its new Port Hedland iron ore export terminal. “The primary focus of the joint venture is to define and develop extensions to the FMG Glacial Valley magnetite deposit, (part of the Abydos project)” Atlas said in a statement.
“FMG may earn a 60 per cent joint-venture interest in the iron ore rights by delineating inferred resources of iron ore within the tenement,” Atlas said. It also said FMG may earn a further 15 per cent joint venture interest in the iron ore rights by completing a pre-feasibility study on the mining of iron ore within the tenement.
A further 12.5 per cent joint venture interest may be earned in the iron ore rights by completing a definitive feasibility study on the mining of iron ore within the tenement. Atlas has converted a memorandum of understanding (MOU) into a binding heads of agreement to use Fortescue’s port facilities for the initial period of production from its flagship Pardoo project, about 100km from Port Hedland.
Pardoo commences production in October, with exports to follow in December.
“This is a ground-breaking third-party port access agreement, the first of its kind in Western Australia,” Atlas managing director David Flanagan said. “We now look forward to building on our association with FMG as we commence development of our second iron ore project, 120km south of Port Hedland at Abydos.”
Atlas is expected to negotiate a rail haulage agreement with FMG to transport ore from Abydos to port. It is also likely to use road haulage to get its product from Pardoo to port. Mr Flanagan flew from the Diggers and Dealers Conference in the mining town of Kalgoorlie to Perth to finalise the negotiations. He returned to the popular conference to make a presentation.
He told delegates that Atlas had not yet committed to offtake agreements because it planned to sell about 60 per cent of product on the spot market to capitalise on high prices. “Every other day we receive an offer … with a base case that we would achieve a premium to the benchmark price,” he said.
He said Atlas was spending between $1.2 million and $1.5 million on exploration each week. The only other company that has an MOU with Fortescue is BC Iron Ltd.