Labrador Iron Mines Holdings Limited announced Tuesday that it has entered into a new iron ore sales agreement with the Iron Ore Company of Canada (IOC) for the sale of all of LIM's iron ore production for the next two calendar years 2013 and 2014.
At the same time, LIM also said that it has entered into an off-take financing agreement with RB Metalloyd Limited, a leading international commodity trading house, under which LIM will receive an advance payment of US$35 million to be credited against future sales of a minimum of 3.5 million metric tons of iron ore during 2013 and 2014.
Over the past two years, LIM has sold 13 Capesize shipments of iron ore to IOC, for a total of approximately 2 million metric tons, all of which was resold in China.
Under LIM's new sales agreement, IOC will pay for the iron ore progressively, as the ore is resold, with the price calculation based on the monthly average of the market index, which should decrease LIM's exposure to market volatility experienced in the past two years. IOC payments will be later reconciled based on IOC's net actual aggregate resale price, adjusted for any product quality specification premiums or penalties, after ocean freight and IOC's price participation.