PERTH (miningweeekly.com) – Dual-listed Moly Mines has entered into a mine gate sale agreement with ASX-listed Mineral Resources at its Spinifex Ridge iron-ore mine, in Western Australia.

Under the transaction, ASX- and TSX-listed Moly Mines’ subsidiary Moly Metals Australia would sell ore from the Spinifex Ridge mine to Mineral Resources at the mine gate.

Mineral Resources would operate the mine to the end of its mine life, while Moly Mines would retain all the tenements and its rights to its molybdenum/copper project, and could continue or restart work programmes at that project.

The purchase price of the mine-gate ore would be calculated on the basis of an agreed minimum product tonnage, with first delivery expected by the end of June, at which time around 2.4-million tons would be available under the current mine plan.

Based on these estimates, the price would total around A$38-million.

Mineral Resources would have the option of paying for the majority of the iron-ore delivered in either cash, or issuing new shares to Moly Mines.

Mineral Resources MD Chris Ellison said that the signing of the contract expanded the long-term relationship between the two companies, and provided the opportunity to use the operating resources of both companies to maximise the return from the combined Pilbara iron-ore inventories.

To enable the offtake agreement with Mineral Resources, Moly Mines terminated a life-of-mine sales agreement with shareholder Hanlong Metals, who had been prepared to take all of the iron-ore produced from the Spinifex Ridge operation.

This was after the two companies failed to reach agreement on a new pricing mechanism for the offtake agreements.

As compensation for this termination, Hanlong would receive a one-off payment of A$1-million, and a royalty of A$1.20/t of ore sold by Moly Mines after termination. The royalty was capped at A$4-million.

“In view of the limited life and scale of the mine, as well as the recent volatility in iron-ore prices, the company has been looking at ways to divest or otherwise de-risk the Spinifex Ridge iron-ore mine,” said Moly Mines chairperson Michael Braham.

He noted that the deal with Mineral Resources was attractive to Moly Mines, as it provided the company with a material upfront payment with no downside pricing risk, and the potential to participate in upside, should the iron-ore price increase again.

“The transaction will also provide more certainty to our site staff as Mineral Resources has agreed to offer the site-staff employment,” he added.

The transaction was conditional upon shareholder approval, as well as the assignment of various Moly Mines operating and facility agreements associated with the project.