Highlights:
• Admiralty Resources, on behalf of its 60%-owned Cia Minera Santa Barbara joint
venture, has commenced discussions with various parties on sales of magnetite
iron ore for the period 2008 -2011
• Admiralty expects to enter a Heads of Agreement for supply of iron ore from
2010/11 to 2018 to be shipped from its proposed Punta Alcalde Capesize port
conditional on the ports’ completion date
• The iron ore contract discussions include a new 2007 benchmark price, funding
options and a change to free-on-board delivery basis
Iron Ore Contract Negotiations
The Admiralty Resources NL (ASX Code: ADY) Board of Directors is pleased to announce
that it is conducting negotiations with various iron and steel mills to finalise the sale contracts
for its budgeted production during 2008 to 2011. It is the intention of the Board to sign a three
year contract on a Free on Board (“FOB”) basis rather than the Cost and Freight (“CFR”) basis
currently employed. As soon as a contract is concluded the market will be informed
immediately.
Importantly, the contracted production will not be disadvantaged in the event of a substantial
increase in iron ore prices for 2008. If there is a 25%-30% price increase in the price of iron
ore as forecast by commodity analysts, this price increase will be reflected in the new
contracts for 2008.This new contract pricing structure will take effect from the point of
announcement by CVRD/RioTinto/BHP and Baosteel who set the international benchmark
price. Using the 63.5% iron ore price of US$45.78/tonne achieved by CVRD in January 2007,
a 25% price increase would imply a 2008 contract price of US$57.22/tonne for Admiralty
Resources 63.5% iron ore fines product. A further announcement by Admiralty Resources is
planned for late October 2007 when shipping arrangements are finalized and Heads of
Agreement and contracts will have been signed.
Cia Minera Santa Barbara will continue to ship iron ore to WISCO as production occurs under
the 2006 sales and purchase agreement. This agreement was negotiated by ITOCHU
Corporation for 17 shipments, of which six have been sent or delivered in 2007 to date. We
are planning to make one further delivery in November, subject to port availability at Caleta,
Candelaria.
Admiralty Resources will enter into a new shipping arrangement in 2008 to make the final 10
deliveries. Our strategy to reduce our CFR shipping costs for these 10 deliveries is to
combine our order for handymax vessels – refer appendix below - with other iron and steel
mills that will be purchasing vessels over a three year period which will provide the opportunity
to reduce freight costs. In addition, in late 2008, we expect our panamax port loader facility to
be completed at Candelaria and we will utilize panamax ships to further reduce the shipping
cost for any outstanding CFR shipments
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