Iron Ore shares soar as Rio eyes Iron Valley assetNovember 24, 2009 - 2:08PM .
Shares in Iron Ore Holdings jumped after Rio Tinto said it may buy the Kerry Stokes majority-owned junior explorer’s Iron Valley deposit in Western Australia’s Pilbara region.
IOH shares were up 29 cents, or 19.59 per cent, to $1.77 by the mid-afternoon while Rio Tinto shares were down 73 cents at $73.05.
Rio Tinto has agreed to enter an exclusive deal with IOH to examine its Iron Valley deposit, about 10km northeast from Rio Tinto’s massive Yandicoogina mine.
This "may lead to the purchase of part or all of the lease covering the deposit", Rio Tinto said in a statement on Tuesday.
IOH said in a separate statement the exclusive negotiating agreement with Rio Tinto runs for six months.
IOH also said it had increased the JORC-compliant resource estimate at Iron Valley by 20 per cent to 191 million tonnes at a grade of 59 per cent iron.
The junior explorer also reported the discovery of high-grade iron ore mineralisation during its first drilling campaign at its Buckland Hills project in the West Pilbara.
IOH and Rio Tinto today finalised commercial terms for a deal first inked in July last year whereby Rio Tinto will buy up to 1.5 million tonnes of iron ore from IOH’s Phil’s Creek project, also in the Pilbara, per year.
Mining at Phil’s Creek is expected to commence in late 2010, IOH said.
"Rio Tinto ... will then transport it to the coast for shipment as part of Rio Tinto’s product suite," the mining giant said.
IOH will sell the ore to Rio Tinto "at the mine gate", meaning the junior explorer only has to transport its product to Rio Tinto’s nearby Yandicoogina stockyard.
Rio Tinto gains a source of ore to blend with its products from various Pilbara operations.
Other junior miners in the region have been encouraged by the transaction, hoping they can seal similar deals with Rio Tinto.
"It is a prime example of how a major established producer and a small, progressive junior can work together to achieve an excellent outcomes," Rio Tinto Iron Ore chief executive Sam Walsh said.
"Without this deal, the benefits flowing from the development of the isolated Phil’s Creek deposit would be denied.
"Rio Tinto welcomes the opportunity to also examine the larger Iron Valley deposit and establish whether it can be best developed within our integrated system of 11 mines, 1300-kilometre rail network and three ports in two locations.
IOH Price at posting:
$1.66 Sentiment: Hold Disclosure: Held
