..."Long Term Iron Ore Off-take Agreement for up to 20 Mta with...

..."Long Term Iron Ore Off-take Agreement for up to 20 Mta with Tangshan
Fortescue Metals Group Ltd (“Fortescue”) advises that together with its wholly owned
subsidiary FMG Chichester Pty Ltd, it has signed an iron ore off-take agreement with
China’s third largest steel mill Tangshan Iron and Steel Group (“Tangshan”).
At a formal ceremony in Beijing today, the companies have replaced pre-existing offtake
agreements between the parties and signed a new and expanded agreement that
provides for an increase in volume and an adjustment to the type of ore to be sold. In
total the agreement provides for the sale of up to 20 million tonnes per annum (“Mta”)
split into two stages.
In the first stage, Tangshan will progressively take 11% of production up to a maximum
of 5Mta of iron ore once Fortescue reaches its initial base production target of 45Mta.
This is as per the original agreement between the parties. The contract term is ten
years.
Pricing is based on the annual industry benchmark relative to the BHPB and Rio Tinto
market pricing for ores of similar capability to FMG products.
Tangshan will accept Fortescue’s “run of mine” product mix, which will include rocket
fines, to fit within reasonable bounds of Tangshan’s annual production plan.
In addition to this amount, Tangshan has committed to purchase in a second stage up
to a further 15Mta of Fortescue’s expanded production. The timing of such
commitment is conditional on Fortescue increasing its production beyond its initial
base tonnage of 45Mta. It should be noted that such expansion is subject to a number
of approvals and consents.
The total Tangshan offtake tonnage, including that drawn from Fortescue’s initial base
tonnage, will progressively ramp up to a maximum of 20mtpa over the contract period
relative to Fortescue’s production volumes and subject to the abovementioned
approvals.
In combination with the recently signed agreement with China’s largest mill Baosteel,
and expansion tonne commitments from other Chinese companies, Fortescue now has
contractual interest for volumes well above the stage 1 base of 45Mta. These
commitments are based on a percentage of additional tonnages to facilitate the
company’s ramp up program. Also included under the contract is a commitment to
cooperate strategically in the pursuit of further opportunities created by the companies’
mutual capabilities.
Mr Russell Scrimshaw, Executive Director Commercial at Fortescue, noted that
Tangshan’s desire to contract for expansion tonnes is reflective of the strong demand
from China’s steel industry. “The development of a broad business relationship with
Tangshan and a number of other key Chinese mills across a number of areas,
including product development and exploration, further positions Fortescue as part of
the supply chain for the world’s largest iron ore market,” Mr Scrimshaw said."

...Oh by the way there is another important raw material used in steel production.........................................!!!!!!!!!!!!!!!!