Strike sells first shipment of lump iron from Paulsens East
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Strike is poised to make its maiden shipment of premium lump iron ore from its Paulsens East project in the Pilbara to a Hong Kong-based buyer.
While the shipment will not be the company’s first go at the rodeo, with iron ore shipments from its Apurimac project in Peru being the first to deliver cash flow, it nonetheless marks a major milestone that could deliver consistent returns for the company.
This is especially given the planned shipment of about 68,000t of lump iron ore is larger than the original plan of 55,000t to facilitate a larger export vessel size and better sea freight rate to China.
Strike Resources (ASX:SRK) noted that the terms of the sale agreement includes market reflective pricing referenced to a benchmark base price and lump premium, with market-typical impurity penalties and a freight differential adjustment, on a Cost and Freight (CFR) basis for delivery into China.
The company will draw-down the proceeds of sale via its local Australian bank, under a Letter of Credit opened by the buyer.
“This maiden iron ore shipment is a highly significant milestone for the company, with the first contract of sale executed and ore from the Paulsens East Iron Ore Mine now being hauled to port at Utah Point,” managing director William Johnson said.
Contractor Odell Mining Services has started hauling Paulsens East direct shipping ore from the mine site to Utah Point.
Strike is also in talks with a South American steel mill, which had previously bought a shipment of iron ore from its Apurimac project, in relation to the next shipment.
This is subject to negotiation of an acceptable price (referenced to a benchmark iron ore price) and the company securing sufficient working capital to fund production to this end.
The sale to the mill, which covered the second shipment from Apurimac, benefitted from lower shipping costs compared to selling ore to China.
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.