Parties line up as Strike Resources accelerates offtake discussions
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Special Report: Strike Resources has revealed it is rapidly advancing marketing activities for the high-grade products from its Paulsens East iron ore project, with significant offtake interest in both lump and fines output.
Strong interest has been reported by Strike (ASX:SRK) from multiple parties looking to secure regular supplies of iron ore from the project, with potential offtake partners and customers for the Pilbara project including Chinese steel mills, established global iron ore traders and a number of other marketing groups.
Confidentiality agreements have been executed with some of these parties and samples of the proposed Lump and Fines products have been prepared and are being provided to a number of parties for their own independent testing
The announcement comes hot on the heels of a feasibility study released earlier this month, which set a target of 1.5 million tonnes per annum of direct shipping ore production from the product starting mid-2021.
Of that target, around 1.1Mtpa is expected to be higher value lump product grading 62% iron with low impurities, with the balance of a 0.9Mtpa fines product grading 59% iron.
Negotiations have included discussion around pricing formula and payment terms for the Paulsens East product, and some parties have expressed interest in contributing project financing facilities and/or pre-payment for iron ore shipments, as well as equity participation at the project level.
Strike managing director William Johnson said the company intended to further accelerate discussions.
“The interest that has been shown in the Paulsens East project by customers and traders has been extremely encouraging, confirming the underlying strength of the iron ore market and the recognition that Paulsens East has the potential to produce highly sought after, high-grade products,” he said.
“The opportunity to receive project funding and shipment pre-payments from these parties will be carefully evaluated as Strike develops its overall project funding strategy.”
Strike aims to have one or more binding contracts executed immediately or soon after a mining permit for the project is issued by the WA Department of Mines, Industry, Regulation and Safety.
Samples have been provided to a number of interested groups for independent testing.
As reported by Stockhead earlier this month, Strike Resources is eyeing significant cashflow from Paulsens East on the back of its exciting feasibility study.
The study projected net cashflows of $167 million and a net present value of $140 million based on an assumed iron ore benchmark price of US$100 per tonne over the mine’s anticipated four-year life.
Pre-production capital costs came in low at $15.7 million, with an internal rate of return of 213%.
Paulsens East consists of a three-kilometre long outcropping high-grade hematite ridge, with a JORC indicated mineral resource of 9.6 million tonnes at 61.1% iron, 6% silicon dioxide and 3.6% aluminium oxide.
Part of that resource was converted into a maiden JORC probable ore reserve comprising 6.2 million tonnes at 59.9% iron, 7.43% silicon dioxide and 3.77% aluminium oxide.
The planned open cut mine at Paulsens East would have a production schedule of 1.5 million tonnes per annum of direct shipping ore with a four-year mine life underpinned by the aforementioned ore reserve.
Paulsens East sits 140km west of Tom Price and eight kilometres from the Paulsens gold mine owned by Northern Star Resources.
This article was developed in collaboration with Strike Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.