PERTH (miningweekly.com) – Iron-ore miner BC Iron and fellow-listed Mineral Resources have amended the terms of the existing Iron Valley iron-ore sales agreement, in an effort to negate the declining market conditions.

Mineral Resources signed the initial Iron Valley agreement with Iron Ore Holdings (IOH) in February last year. However, BC acquired IOH earlier this year, offering IOH shareholders 0.44 of its own shares, and 10c in cash for every IOH share.

The initial agreement allowed for Mineral Resources to develop the Iron Valley project, in Western Australia, as a direct shipping ore (DSO) operation, and in line with this strategy, the Iron Valley mien started production in the September quarter, with road haulage and shipping starting in the December quarter.

However, BC said on Friday that in light of the current market conditions, the two companies have been exploring a range of potential initiatives bot at the mine, and within the logistics supply chain, aimed at reducing both production cost and improving the saleability and value of the Iron Valley product.

BC said that the ranges of initiatives being considered would significantly enhance the long-term viability of the Iron Valley operations in a lower iron-ore price environment, and could potentially bring forward sales payments to BC through increased production rates.

If approved, Mineral Resources would be required to sole-fund additional capital for the Iron Valley project to implement these initiatives, and the two companies have now varied the terms of the Iron Valley agreement to facilitate this, and to provide certainty to both parties.

Mineral Resources was expected to make a final investment decision on these initiatives by April next year, and in the interim, the company would continue to operate the Iron Valley mine as a DSO operation.

During this interim period, and assuming a free-on-board received price of between A$70/t to A$110/t, and production rates of between three-million to five-million tonnes a year, BC could see an annual earnings inflow of between A$2-million and A$24-million from the Iron Valley operation.