Diversified miner Glencore Xstrata is to purchase iron ore from El Capitan Precious Metals' New Mexico mine in a bid to bolster its exposure to iron ore.
ECPN President and CEO Chuck Mottley said in a statement to shareholders that in recent weeks the company has accomplished three significant milestones, "executed a contract for the mining and transport of the high-quality iron ore from the El Capitan mine, entered into an agreement for the sale of enough iron ore to generate positive cash flow for the company, and provided for the separation of precious-metals-rich tailings at the mine site for future processing".
Under the terms of the agreement, Glencore Xstrata commits to ongoing purchases of iron ore from the El Capitan mine.
Glencore Xstrata will issue a letter of credit to guarantee payment on iron-ore sales.
Mottley said that, as a result of last week's agreements with Logistica US Terminals, equipment will move to the mine site immediately and mining operations are expected to commence within a few weeks. Glencore Xstrata said March 4 it sold 33.2 million mt of iron ore in 2013, a 68% annual rise in volumes, as it proceeds with studies for projects in Africa to gain marketing clout.
As a relatively new entrant to iron ore, Glencore Xstrata relies on some initial offtake agreements and trading activity as it seeks to build its own mines in partnerships to allow for marketing of its own ore.
On February 11, Platts reported on a note issued by brokerage Investec that Glencore Xstrata is still interested in developing its iron ore mining business to complement industry leading positions in coal and base metals but may hold back from sizable acquisitions in the sector due to asset prices.
Glencore Xstrata has trading positions in iron ore but so far little in the way of producing assets compared to Vale of Brazil and the Pilbara, Western Australia-focused Rio Tinto and BHP Billiton.
