Pluton Resources has executed a 1 million tonne offtake agreement for its Cockatoo Island iron ore project.

Under the agreement, which was arranged by equal joint partner Wise Energy Group, the JV will receive AUD 20 million as a pre payment to fund the statutory environmental bonds.

The payment of the environment bonds will allow Pluton to start mining operations at the Western Australian project. Cockatoo Island has a FOB operating cost of about AUD 51 per tonne with WEG receiving a 3% marketing fee.

The initial open cut mine plan forecasts monthly shipments of Direct Ship Ore of 43,000 tonnes in November 2012, increasing to 86,000 tonnes in December 2012 onwards.

Scheduled iron ore production is to be sourced from the development of the Stage 4 open cut mine, which may also be supplemented by mining of remnant iron ore material from Stage 3. Stage 4 has a Probable Ore Reserve of 1.2 million tonnes at 68.5% DSO as well as other resources.

The initial mine plan covers mining of Stage 4 and any potential additional iron ore that may be reclaimed by remnant mining from Stage 3 or other previously mined areas on Cockatoo Island.

Pluto expects to extend the open-cut mine life by upgrading the classification of Inferred Resources and converting the Indicated Resources into Ore Reserves by carrying out further drilling and technical studies of exploration targets.

Source - Proactive Investors

(www.steelguru.com)