Palladon lines up iron ore sales contract

Vancouver — Soon-to-be iron ore producer Palladon Ventures (PLL-V) has secured a one-year, one million tonne contract to supply a purchaser in China.

Mining is scheduled to commence this month at its Comstock-Mountain Lion iron project in southwestern Utah. Palladon is finalizing arrangements with its contract miner, Gilbert Engineering, and with railroad and port facilities.

The deposit will be open pit mined, crushed and magnetically treated, producing direct shipping quality ore to be rail-hauled to a California port for loading onto the customer’s ships. Initial production is expected to come from higher grade zones of the pit.

Although specific pricing terms were not disclosed, Palladon expects to generate significant cash flow from the contract with continued strong world iron prices.

Palladon acquired the project earlier this year for US$10 million from Iron Ore Mines, a company affiliated with now bankrupt Geneva Steel that previously operated the mine.

The Comstock-Mountain Lion open pit iron mine operated for several decades until 1995, producing an estimated 80 million tonnes of iron ore, until operations ceased due to weakening demand and steel prices. Remaining ore reserves following closure of the mine, as estimated by Geneva Steel, are 25 million tonnes grading 47.1% iron. Several low-grade stockpiles also remain and are estimated to contain about 12.5 million tonnes averaging 42% iron. The potentially open pittable Rex deposit, which has never been mined, contains a measured iron resource of 89 million tonnes averaging 39% iron. The reserve and resource figures all predate National Instrument 43-101.

The company got a 25% boost on the market following the news, with investors driving its stock to the 93 per share level on high volume. With 30.2 million shares outstanding, Palladon posts a $28 million market capitalization.