NEW YORK Canadian iron ore producer Labrador Iron Mines Holdings Ltd. (LIM) has renewed its iron ore sales agreement with Iron Ore Co. of Canada (IOC) for all of its iron ore production in 2013 and 2014.
The Toronto-based company began its third year of direct-shipping iron ore (DSO) production at its mine in the Schefferville area in Western Labrador in April.
It is targeting production of 1.75 million to 2 million tonnes of sinter fines and lump this year. The first Capesize shipment of 2013 is expected to be loaded around the end of May.
LIMs iron ore prices are set using a reference price for the 62-percent iron ore spot market c.f.r. China, vice president of investor relations and communications Keren Yun previously told AMM sister publication Steel First.
IOC will pay for the iron ore progressively, as the ore is resold, with the price calculation based on the monthly average of the iron ore reference price, which should decrease LIMs exposure to the market volatility that has been seen in the past two years.
Payments will later be reconciled, LIM said, based on IOCs net actual aggregate resale price, adjusted for any product quality specification premiums or penalties, after ocean freight and IOCs price participation.
"We are very pleased to be able to continue our working relationship with IOC as we head into our third year of production from our Schefferville area iron ore mines," LIM chairman and chief executive officer John Kearney said.
"Extending the contract for the next two years and fixing the price to be calculated on the monthly average of the market index are two important improvements over previous years," he added.
Over the past two years, LIM has sold 13 Capesize shipments of iron ore to IOC, or about 2 million tonnes. The material was resold in China, where the sale of LIM iron ore has experienced unpredictable variations based on market conditions. The price calculation was based on the daily spot iron ore price in China, subject to varying selling discounts.
A version of this article was first published by AMM sister publication Steel First.