Australian Perth-based mining company Fortescue Metals Group has announced that it has signed a cooperation agreement with one of China's leading steel mills, Hunan Valin Iron and Steel Group Company Ltd (Valin), in order to increase iron ore sales to Valin and to research new technologies to process lower grade iron ores.
Accordingly, Fortescue and Valin have agreed to establish a joint venture to develop lower grade resources from some of Fortescue's tenements and to give Valin the option to participate in any additional new projects Fortescue undertakes.
Xiangtan Steel, a subsidiary of Valin, has an existing offtake arrangement with Fortescue for up to 1 million mt per year, and under this agreement and subject to expanded production, Fortescue agrees to increase that supply arrangement to up to 4 million mt per year from 2010 onwards.
Fortescue and Valin will exert reasonable endeavors to negotiate a new supply arrangement with the Valin parent entity which will grow from an initial base of up to an annual 1.4 million mt to a maximum of up to 6 million mt per year by 2013. Again this agreement would be dependent on Fortescue expanding current production. Pricing under the agreements is to be referenced against the benchmark pricing regime consistent with Fortescue's other agreements.
In addition, the companies will seek to progress a feasibility study by June 30, 2009, which will investigate the commercial and technical feasibility of further processing iron ore that comes directly from Fortescue's surface miners onto the run of mine stockpile.
Moreover, the parties agree to establish a JV with China Central South University to review the feasibility of exploiting lower grade hematite ore with an iron grade Fe content at or around 50 percent.
Fortescue has agreed to offer Valin the ability to participate in any future project opportunities.