WorldVest signs iron ore purchase contract with Chinese commodities trading company
WorldVest (OTC:WOVT) has announced further progress in its bid to move into the iron ore industry, confirming that its 100% owned subsidiary Hurricane Global Resource Corp ("Hurricane") has signed an iron ore purchase contract with an undisclosed commodities trading company in China - which is one of only 118 Nationwide enterprises qualified for iron ore import by Chinese authority in 2005.
The contract will see Hurricane supply up to 12 million tonnes of iron ore annually, which it plans to source through its contacts in Latin America. Hurricane is effectively acting as the middleman between the commodities trader in China and iron ore producers South America, notably Brazil. However, Hurricane has also expressed its desire to acquire iron ore assets to control a more significant slice of the value chain.
Hurricane confirmed that it had already contracted an iron ore producer in Chile to supply approximately 20% of the annual volume, or 2.39 million tonnes of fines, and that the China based commodity trader has ‘accepted and signed' a "Supplier Addendum", subject to the April 17th, 2010 mine site visit.
Assuming the commodity trading company approves the addendum, the first shipment of 70,000 tonnes of iron ore is expected ‘with a period of 45 days' and will ramp up to 150,000 tonnes per month by the third month and 300,000 tonnes per month by the eighth month. Hurricane stated that the 2.39 million tonnes of iron would have a value of $286.8 million.
"We are extremely excited to mark this pivotal moment in the rapid growth of Hurricane, which will also greatly impact the consolidated earnings of WorldVest as its parent company," Hurricane Senior Managing Director and WorldVest CEO, Garrett Krause commented.
Just last month, Hurricane inked a joint venture agreement to launch an iron ore sales business in China. The company has opened an office in Tianjin and appointed Quinli Ma as its Chief Purchasing Officer. Mr. Ma previously worked as Chief Purchasing Officer for Tainjan Pipe Group - a steel pipe manufacturer. At Tianjan Pipe he was responsible for purchasing 35 million tonnes of iron ore from 93 different sources.
Speaking to Proactiveinvestors this week Krause confirmed that Worldvest is hoping to announce further iron ore purchase contracts in the ‘coming weeks' and is expecting to receive a Letter of Credit issued by the Chinese Commodities Trader to supply full financing for the purchase contracts with iron ore producers.
The move into iron ore could be a shrewd one for Worldvest. BHP Billiton (ASX:BHP, LSE:BLT), Vale (NYSE:VALE) and Rio Tinto (ASX:RIO, LSE:RIO) currently control the world's seaborne iron ore market, and have been keen to push through significant price increases onto steel producers. China is the world's largest steel producer, and has been attempting to resist big increases in iron ore contract prices.
In recent weeks, BHP Billiton has moved towards quarterly contract prices, away from annual contracts, in an attempt to ensure it can benefit more quickly from higher spot prices for iron ore. This has been met with anger from European and Chinese steelmakers who are keen to keep annual pricing to ensure stability in their own input costs.
In parallel to China's predicament with iron ore, it has been keen to secure new supply agreements with smaller iron ore producers in an attempt to increase security of supply and dilute the grip of the ‘big three' iron ore players. WorldVest is clearly looking to tap into this desire by China to secure more iron ore at better prices. If it can, the reward could be handsome.
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