Australian iron ore pellet producer Grange Resources Ltd said that it has agreed with its major customers, Bluescope Steel and Jiangsu Shagang International Trade to price iron ore pellets using Platts benchmark.

The pricing mechanism, which will cover the sale of Grange's Savage River pellets, will be based on Platts 62% index for iron ore fines, to be adjusted for the higher 65% iron content of the pellets.

Mr Russell Clark CEO and MD of Grange in a statement said that the agreed pricing mechanism will be applied retrospectively to all shipments from April 1, 2010 which was covered by interim prices.

He said that "The result is that Grange will receive AUD 70 million in cash to reflect the differences between the interim pricing and the pricing mechanism now agreed.”

With the current Platts index price for iron ore pellets at more than AUD 200 per tonne, free on board basis, Clark said Grange is planning to produce around 2 million tonnes of pellets in 2011.

Platts iron ore index is widely used by global miners like Vale and Rio Tinto in pricing sales of the steelmaking raw material to steel producers since the industry shifted to a more flexible quarterly pricing system after abandoning a 40 year old annual arrangement in April last year.

(Sourced from af.reuters.com)