BC, MinRes to shore-up Iron Valley
BC Iron and Mineral Resources have moved to shore-up the Iron Valley project to continue to operate profitably in a lower iron ore price environment.
BC said in a statement this morning it had agreed with MinRes to vary the terms of its existing Iron Valley iron ore sales agreement to implement initiatives to improve the financial robustness of the project and ensure its long term viability.
The company said the initiatives were necessary to reduce the costs of production and improve the saleability and value of its product in a lower iron ore price environment.
Iron Valley would continue to operate as a direct shipping ore operation until MinRes makes a final investment decision on the initiatives in April next year.
MinRes would be required to sole fund any upgrades required.
BC said it expected annual EBITDA from Iron Valley to be in a range of $2-$24 million while it continued as a direct shipping ore operation, assuming production of 3-5mtpa at prices of $A70-$A110 million a tonne.
"Further guidance on potential earnings that could flow to BC Iron post implementation of the initiatives will be provided at the relevant time," the company said in a statement.
BC said the new agreement would continue to be structured so that it could not incur any losses from the operation.
Managing director Morgan Ball said the variation would allow MinRes to invest further capital to develop Iron Valley into a robust, long term operation and ensure the company continued to generate earnings from the project.
"This is clearly an outcome which benefits both companies," he said.
"We have a strong working relationship with MinRes and look forward to them applying their significant expertise in progressing the Iron Valley initiatives."
BC inherited the Iron Valley asset when it completed the takeover of Iron Ore Holdings in October.
IOH had previously signed a mine gate sale agreement with MinRes whereby it would bring Iron Valley into production and operate the project with the two parties effectively sharing the profits.
BC Iron shares were off two cents, or 3.96 per cent, to 48.5 cents at 9.05am while MinRes shares were up 37 cents, or 5.48 per cent, to $7.12.
