revises psa with shagang, page-12

It is Shagang that has forced these changes, our new CEO bends to their desires. It is more about giving Shagang flexibity, not Grange.

Australian miner Grange to halve annual iron ore pellet supply to Shagang millSingapore (Platts)--19Nov2012/352 am EST/852 GMT




Australian miner Grange Resources will halve annual offtake volume of iron ore pellet to Jiangsu Shagang Group, China's largest private steel mill, according to a statement released by Grange Resources Monday.

The annual pellet offtake volume to Jiangsu Shagang International Trade Co. Ltd. -- the sales and trading arm of the mill -- will be cut from 2 million mt to 1 million mt, the statement said.

This reduction aims to eliminate "the reliance on a single offtaker and geographic market," the release said.

"We have a significant cornerstone contract, at market prices, with Shagang ... and the ability to diversify our customer base for products that are sought after in Asian markets as well as retain some flexibility to sell into spot price markets," Richard Mehan, Grange Resources Managing Director, said.


A Shagang company source said the mill will get additional pellet material supplied from other sources, not necessarily Australian miners, declining to elaborate further.

Grange will price pellets based on the Metal Bulletin weekly 65-66%-Fe pellet assessments in the new supply contract, the Shagang source said. The new pricing mechanism will be applied retrospectively to all pellet shipments from April 1 this year.

"The reason for this change [in pricing mechanism] is because this is the only index with a pellet price," the source at Shagang said.

Grange Resources owns and operates Australia's largest integrated iron ore mining and pellet production business located in the northwestern region of Tasmania.