IronClad Mining (ASX: IFE) has taken another step towards utilising the cash generating potential of the company's new Wilcherry Hill mine.
The South Australian Government has now approved the development application for port facilities designed for iron ore shipments from the project.
A major plus for Wilcherry Hill is that the first two years of production from the project has been contracted for sale to international steel mills under comprehensive sales and marketing agreements.
Additionally, 50% of year three and four’s forecast production has been contracted for sale through an off-take agreement with Hong Kong based company New Page Investments
Stage one at the project includes the production of 1 million tonnes per annum of direct shipping ore magnetite, which will double in the second year of operation.
Wayne Richards, managing director, commented on the positive development news for the company:
“We are most appreciative of the South Australian Government’s expeditious approval of this Development Application for another vital piece of SA mining infrastructure.
“For IronClad, development approval for the port facility finalises the company’s requirements for an ‘end-to-end’ logistics supply chain for the ore produced from our Wilcherry Hill Project, and has the potential to be expanded to accommodate the ore from our larger Hercules Project currently under review.
“Further, the facility will provide an economic and viable export option (in a timely manner), for the development of our projects, and will stimulate economic growth and employment opportunities within the area.”
Importantly - the port facility will provide an export point potentially for other mining companies and exporters in the region.
The Wilcherry Hill iron ore project is a joint venture between IronClad (80%) and Trafford Resources (ASX: TRF) (20%).
What the approval means
The outcome from the project development approval is the final process for IronClad to commence construction of infrastructure at the existing Lucky Bay port, near the township of Cowell on the coast of the Spencer Gulf, and permits future iron ore exports via the new Eyre Peninsula facilities.
In a first for South Australia, IronClad will initially use the Lucky Bay facility to transport iron ore from this port to ships anchored offshore adjacent to the port.
IronClad’s growth plans could potentially upgrade this system to incorporate the innovative concept of a floating harbour, with suitable holding warehouses for the ore, both on land and at sea.
Cape-sized vessels with a carrying capacity of up to 150,000 tonnes could then be loaded with iron ore from the floating harbour, which would potentially be owned and operated by IronClad.
IronClad has an agreement with Sea Transport Development SA Pty Ltd (SEATS) for full access rights to the designated 50-hectare port site at Lucky Bay, where it will store and ship iron ore from its Wilcherry Hill and Hercules projects.
Richards added, “The construction of the first purpose-built barge for the transhipment of ore is well advanced, with the vessel scheduled to arrive in South Australia early in the third quarter of this calendar year.”
At the end of last month IronClad received a major vote of confidence in the company's operations from Cygnet Capital, with an underwriting agreement signed for around three quarters of the 16.33 million April 2012 company options.
This ensures the company receives guaranteed gross proceeds of $9 million.