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Glencore has solidified its support of Iberian Minerals’ Cehegín iron ore project in Southeastern Spain.
The company entered into a cooperation agreement with Iberian back in October 2013. After conducting its due diligence, Glencore exercised its option to take a 20-percent equity in the Spanish project in May of this year, and the company officially signed off on the joint venture today. Under the terms of the agreement, Glencore will hold a 20-percent interest in Cehegin and is committed to purchasing all production from the mine.
When asked about the significance of Glencore’s support for Iberian, Rick Gliege, executive director, corporate development for Iberian, told Iron Investing News, “as one of the largest global diversified natural resource companies in the world, Glencore offers a superb technical team with respect to exploration and mine development. They offer expertise in marketing, logistics and financing for the project.”
Gliege also gave several reasons why the major miner was drawn towards working with Iberian, stating, “Glencore’s main interest in deciding to move forward with the Cehegín magnetite iron ore project was largely due to it being a brownfield operation.” He noted that more than 4 million tonnes were mined by previous operators between 1975 and 1989, producing a product with high grades — over 65 percent iron — as well as very low penalizing impurities.
Iberian put out its last press release regarding Cehegín near the end of May.
Additionaly, Gliege explained, “Glencore was also attracted to the world-class infrastructure with the deep sea Port of Cartagena only 115 kilometers from the site, connected by a toll-free highway and rail.”
Of course, it is also important to note that Glencore has agreed to purchase all production from Cehegín. Offtake agreements can provide a significant measure of stability for mining companies, as Gliege highlighted. When asked about the agreement, he said, “Glencore’s offtake agreement with Iberian will guarantee payment for the end product,” and pointed out that the company is known for never reneging on offtake agreement payments.
In terms of what’s next for the project, Gliege stated that the two companies “will jointly undertake a work program which is intended to confirm the mineralization outlined by the previous drilling. Drilling will look to extend the mineralization by stepping out along strike, and additional reconnaissance drilling will target the five remaining anomalies that have been identified.”
There is certainly more work to be done at Cehegín, but as with several mergers and acquisitions that took place between copper companies last week, it is interesting to see companies taking an interest in iron ore projects despite indications of an iron market surplus. In any case, support for a junior from a major miner is an important factor to take note of.
Securities Disclosure: I, Teresa Matich, hold no investment interest in any companies mentioned.
Editorial Disclosure: Iberian Minerals is a client of the Investing News Network. This article is not paid-for content.
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