Labrador Iron Mines Holdings Limited report that it has entered into an agreement with the Iron Ore Company of Canada for the sale and shipping of all of LIM's 2011 iron ore production.
Iron ore from LIM's new James Mine in northwest Western Labrador is currently transported by rail from its Silver Yards rail head, near Schefferville, via the TSH railway and the Quebec North Shore and Labrador railway, to the Port of Sept-Iles where the ore is unloaded and stockpiled adjacent to LIM's Point-aux-Basques dock facilities leased from the Port of Sept-Iles.
Under the confidential sales contract with IOC, the iron ore will be delivered to Asian markets and resold by IOC's marketing organization on the spot market. The sale price for iron ore sold to IOC will be based on the actual realized prices to Chinese customers, less an allocation for handling, loading, shipping and sales costs.
IOC is Canada's largest iron ore producer from its mines located in Western Labrador and is a leading global supplier of iron ore pellets and concentrates. IOC's major shareholder and operator is the international mining group Rio Tinto which has activities in more than 40 countries throughout the world. IOC owns 100% of the QNS&L railway and, at the Port of Sept-Iles, owns established storage and ore handling facilities, including its ship dock capable of taking ocean going vessels up to 240,000 DWT tonnes.
LIM has previously entered into a life of mine, confidential rail transportation contract with QNS&L for the rail transportation of LIM's products on the QNS&L railway. This contract provides for a confidential tariff, with capacity and volume commitments on the part of each party.
LIM's agreement with IOC will enable utilization of Cape Size Ocean going ships, where current freight rates are lower than for the alternative but smaller Panamax vessels, for the shipment of LIM's iron ore.
LIM believes that the benefits associated with this arrangement, together with the benefits of the utilization of larger ships, will ensure that the maximum possible tonnage of LIM's iron ore will be efficiently shipped and sold during the remainder of 2011.