A strong day for steel group and emerging iron ore exporter, OneSteel, with the shares jumping 23c in a strong market to reach yet another all time high of $6.51.
Driving the price was news of two new contracts for the company’s small but significant export iron ore operation in South Australia.
OneSteel went closer to showing the market the true value of its $385 million plan to develop the iron ore reserves near Whyalla in South Australia by revealing the two major contracts within minutes of each other.
The two announcements brought to three the medium term contracts it has signed covering exports of iron ore: so far around 40 per cent of the 40 million tonnes available over the next 10 years, have been committed under the three deals.
Both are with Chinese steel groups: the first is with Shanxi Haixin Iron & Steel Group Co (Haixin) which will take up more than six million tonnes of iron ore over the life of the 10-year contract.
“The signing of this long-term export iron ore contract consolidates OneSteel’s position as a significant Australian exporter of iron ore,” chief executive Geoff Plummer said. It is due to start July 1.
The second was another 10-year export sales agreement for supply of iron ore to Hebei Jinxi Iron & Steel Co. Ltd. (“Jinxi”). The contract will cover the supply of more than five million tonnes of iron ore over the term of the contract.
The company said “The sales agreement represents the third long-term contract to be signed for the iron ore exports that have been made available through Project Magnet. Project Magnet, to commercialise its magnetite iron ore resources in South Australia’s South Middleback Ranges, releases approximately 40 million tonnes of hematite lump and fine ore that is planned for sale over a 10-year period”.
That deal is also due to start July 1.
The first contract signed covers a 10-year export agreement involving more than six million tonnes of iron ore with Rizhao Steel, based in China’s Shandong Province.
“The sales agreement is the first long-term contract to be signed for the iron ore exports that have been made available through Project Magnet, OneSteel said in a statement in early April.
BHP Billiton, OneSteel’s old owner, found the buyers as OST’s export ore marketing agent.
The mining component will be carried out by the Leighton subsidiary, HWE under a deal signed late last year.
The contract is worth more than $300 million, covers the contract mining operations and other related services at OneSteel’s iron ore mines in the South Middleback Ranges. The iron ore will be used at OneSteel’s Whyalla Steelworks, and also sold externally.
OneSteel says that under Project Magnet, its production rate of magnetite and hematite iron ore in the South Middleback Ranges will rise to over nine million tonnes a year by the middle of this year.
The magnetite iron ore will be processed on site at a new plant owned and operated by OneSteel and will be used at Whyalla.
