Fortress Minerals' subsidiary, Fortress Resources, has signed two nine-month offtake agreements with a third-party domestic steel mill in Malaysia. The agreements will run simultaneously and will involve the delivery of 150,000 and 90,000 metric tons of iron ore. The contracts are expected to provide a steady income stream and positively impact the group's earnings per share for FY2024.
In a move aimed at solidifying its market position, Fortress Minerals, through its subsidiary Fortress Resources, has entered into two new nine-month offtake agreements with an unnamed third-party domestic steel mill in Malaysia. The dual contracts are expected to run concurrently, starting from October 1, 2023, to June 30, 2024.
Under the terms of these agreements, Fortress Resources commits to delivering approximately 150,000 and 90,000 metric tons of iron ore to the domestic steel mill. Importantly, these deliverables come with an option for a 20% variance, either additional or reduced, at the discretion of Fortress Resources.
The pricing of the iron ore will be determined based on a formula that takes into account daily prices as indicated by Platts, a benchmark service for the oil industry. This formula will be adjusted according to the iron content of each individual shipment, providing a dynamic pricing model that benefits both parties involved.
According to Fortress Minerals, these agreements will serve as a stable source of income and cash flow during the agreement period. While the deals won't have any impact on the company's net asset value (NAV) for the fiscal year ending on February 29, 2024, they will contribute positively to the group's earnings per share (EPS) for the same period.
The announcement comes at a time when the steel industry is undergoing various changes, driven by fluctuating demand and increasing regulatory scrutiny. The move by Fortress Minerals is thus seen as strategic, aimed at both revenue generation and risk mitigation.
The company's stock remained stable at 26 cents as of October 23, signaling investor confidence in the move. This stability in share price, combined with the new offtake agreements, places Fortress Minerals in a favorable position for future growth and profitability.
The new offtake agreements by Fortress Resources, a subsidiary of Fortress Minerals, with a third-party steel mill in Malaysia signify a strategic move for steady income and risk diversification. While it doesn't affect the net asset value, the deal is set to boost earnings per share, making it a positive development for the company and its stakeholders.