Australia's Gindalbie signs $65-billion iron ore supply deal with China's AnSteel

Independent Australian iron ore producer Gindalbie Metals Ltd today signed Australia's largest-ever iron ore supply contract by agreeing to sell iron ore worth $65 billion over a 30-year period to China's second-largest steelmaker, Angang Group International Trade Corporation (AnSteel).

The contract, covering the life-of-mine production from Gindalbie's Karara Iron Ore Project in Western Australia, is for supplying 900 million tonnes of iron ore over three decades to Ansteel.

Gindalbie's core asset is the world-class $1.8-billion Karara Iron Ore Project, which it is developing through its subsidiary Karara Mining Limited in a 2007 equal joint venture with AnSteel. Construction of the mine started late last year.

Under the deal, Ansteel, as a joint venture partner will be lifting the entire iron ore production from the second half of 2011 by paying market price, but will be sharing the profits from the joint venture.

Based on the 2009 Benchmark iron ore fines price, the off-take agreement is worth approximately $580 million annually increasing to more than $2.1 billion a year at the project's potential production rate.

Perth, Western Australia-based Gindalbie, where Ansteel holds a 36-per cent stake, said that the contract covers the total iron ore production from the Karara Project, which has the potential to produce more than 30 million tonnes per annum for 30 years.