GWR (GWR.AX) has now formally executed the Alliance Mining Contract with Pilbara Resource Group, a contractor. PRG will start developing and mining the first stage of the C4 iron deposit, part of its Wiluna West iron ore project. This agreement covers the first one million tonnes to be mined from the deposit which currently hosts almost 22 million tonnes at an average grade of 60.7% Fe, which makes qualifies the ore from the C4 deposit as a DSO product (hardly a surprise as the C4 deposit appears to be an outcrop of high-grade iron mineralization).
As part of the agreement, PRG will take care of all capex and the day-to-day operations of the mine based on a ‘cost plus’ basis: PRG will be rewarded with 30% of the profits from what essentially has become a joint venture agreement on a 1 million tonne basis. PRG will build the mine with its own capital, where after GWR will be allowed to reimburse PRG from the sales of the iron ore shipments. The only additional requirement appears to be GWR being required to provide a payment guarantee of up to A$1.75M which PRG will be allowed to call on if the project gets suspended.
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