West Perth-based Moly Mines Ltd (ASX & TSX: MOL) announced today signing of a 10 year- offtake agreement with ThyssenKrupp Metallurgie GmbH (TKMet) for all molybdenum production from Spinifex Ridge in the Pilbara hinterland.
The project, which lay dormant for decades when known as Coppins Gap, has been proven up as a medium-to-high grade project from a major drilling programme in the past two years by Moly Mines.
The company's Chief Executive, Dr Derek Fisher, said cementing the alliance with one of the world's largest steel and technology groups sends a powerful message to the international financial community.
TKMet will take delivery and purchase 100% of molybdenum product as oxide and ferro-molybdenum after it has been toll processed under the company's tolling agreement with its strategic alliance partner, the Chilean metallurgical group Molymet.
Fisher said pricing will be determined through reference to prevailing market prices and conditions at the time of sale, therefore maintaining full exposure to the molybdenum price.
This agreement is a keystone to the project financing. Investors will take note that we have successfully preserved shareholder value by ensuring our sales agreement provides maximum exposure to (the) molybdenum price, Fisher said. We have resisted the temptation of floor-priced contracts with price participation mechanisms that transfer value away from shareholders.
The concentrates from Spinifex Ridge will be shipped to Molymet's plant in Santiago, Chile for conversion to molybdenum oxide and/or ferro-molybdenum.
The company said Wednesday that project development is on track for commissioning in the second half of 2009.
Securing this offtake deal is another feather in the cap of Andrew (Twiggy) Forrest, now ranked as Australia's richest man. Forrest is a major shareholder in Moly Mines as well as principal shareholder in the Pilbara's big new iron ore producer Fortescue Metals Group which has developed the Cloudbreak deposit, built a railway system and established stockpiling and shiploading facilities in the Pilbara's Port Hedland. In the process it has broken the dominance in Pilbara iron ore of BHP Billiton and Rio Tinto.
ThysssenKrupp AG has a combined turnover of over €50 billion in 2007 across its business units and has over 190,000 employees world wide in 2,500 locations in 70 countries. It is one of the world's biggest producers of high quality and stainless flat steel products and currently has expansion programmes in Brazil and the United States.