Why wait to build an iron ore processing plant when you can make a handsome profit shipping run-of-mine ore to the red-hot Chinese market?
That’s the reasoning behind a decision by Palladon Ventures (PLL-V) to sign a five-year contract to sell a minimum of 2 million metric tonnes of run-of-mine iron ore a year to China Kingdom International Minerals & Metals.
Palladon stock traded up 34% to 35 on the news on a trading volume of 1.6 million. Its shares have traded within a 52-week range of 12.5 to 46.
The deal with CKI, one of China’s biggest iron ore importers, was signed with Palladon’s private subsidiary, Palladon Iron.
Pricing will be fixed through March 31 2009 and will adjust for future annual periods based on changes in the World Benchmark Prices for iron ore.
Under the arrangement, the contract price is quoted FOB a west coast port in the United States and CKI will be responsible for footing the bill for all ocean freight including the contracting and scheduling of vessels.
Palladon estimates shipments will begin in the third quarter of this year with an initial capital investment of less than US$5 million.
Palladon says it will reinvest some of the cash flow generated from the sales agreement into a feasibility study to help finance the eventual construction of a processing plant at its Iron Mountain project in southwestern Utah.
The Vancouver-based company is currently finalizing a mining and logistics plan for the start of operations at the Iron Mountain project.
An electrical sub-station facility has been installed, grounded and charged and is ready to be hooked up to the Cedar City power grid. Mobilization and shipping will begin soon to meet the pending shipping dates.
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