Pilbara Minerals Ltd. (ASX:PLS) announced that it has entered into a mine gate sale agreement with Atlas Iron Ltd. (ASX:AGO). Under the agreement, Pilbara will supply Atlas with direct-shipping ore from its Western Australia-based Pilgangoora lithium-tantalum project.
As quoted in the press release:
- Mine Gate Sale Agreement finalised with Pilbara iron ore miner Atlas Iron (ASX: AGO) encompasses proposed sale of a minimum 1.0Mt of run-of-mine lithium-tantalum ore from the Pilgangoora Project.
- Atlas will utilise its existing processing infrastructure and logistics chain in the Pilbara to crush the ROM material and supply it as Direct Shipping Ore (DSO) to the final customer.
- MoU executed with Sinosteel Australia Pty Ltd contemplates offtake for up to 1.5Mt under an agreement to be entered into between Atlas and Sinosteel.
- Mine gate sale pricing is underpinned by an attractive US$ fixed base price per wet metric tonne to Pilbara, subject to adjustments in respect of material specifications and final shipping costs.
- A USD$3M prepayment facility (“Mine Gate Commitment”) is a pre-condition to the commencement of DSO sales to Atlas.
- The innovative arrangement, which is targeted to commence in March 2018, will allow Pilbara to generate upfront revenue and operating cash-flow while it commences the commissioning and ramp-up of the Pilgangoora Stage 1 Project in Q2 next year, with concentrate exports to follow shortly thereafter.
Ken Brinsden, managing director and CEO of Pilbara, commented:
From Pilbara’s perspective, this is an opportunity to generate upfront revenue and cash-flow in the early stages of commissioning and ramp-up of the Pilgangoora Project, without detracting from our core focus on building a longterm spodumene concentrate business.
The ability to generate early cash-flow is a significant bonus for any resource company in the commissioning and ramp-up phase, and this arrangement with Atlas allows us to leverage off Atlas’ established infrastructure and logistics chain to do so with minimal additional capital outlay.