PERTH (miningweekly.com) – Iron-ore miner Atlas Iron has struck a deal with contractor BGC Contracting that would allow mining to resume at the Mt Webber mine, in the Pilbara, in July.

The Mt Webber operation was expected to ramp-up to a rate of six-million tonnes a year by the December quarter, and operate for about eight years, the company reported this week.

Under the terms of the agreement, Atlas would pay BGC between A$17.1-million and A$19.1-million in Atlas shares or cash to cover termination costs associated with the Wodgina mining contract, suspension, remobilisation and other costs at the Mt Webber mine, with discounts applicable for the portions paid in cash.

The composition of the payments would be determined by preference to the amount raised in a proposed capital raising, Atlas said.

Atlas had also agreed to pay BGC an option fee of A$3.45-million in either cash or shares, against the future purchase of the Mt Webber crushing and screening plant. The balance of the plant purchase cost of between A$8-million and A$18-million would be settled during the term of the contract, according to the depreciated value within the contract schedules at the time of exercise and depending on the remaining life of the contract.

Furthermore, Atlas and BGC had agreed to target mining costs savings of between 10% and 12% at the Mt Webber operation, and even operating costs across the Mt Webber, Wodgina and Abydos mines, allowing Atlas to have a break-even price of around $50/t.

Atlas MD Ken Brinsden told shareholders that the resumption of production at Mt Webber was another key step in the company’s strategy to ensure a robust financial future.

“With Mt Webber operating, we will once again have a strong, diversified production base but with markedly lower costs,” said Brinsden.

“We are firmly on track to achieve our key goals of low costs, strong margins and healthy cash flows backed by a stronger balance sheet that will enable the company to withstand periods of price volatility.”

The agreement with BGC had no correlation on the contractor collaboration model put in place at the Wodgina and Abydos mines, where the contractors could receive an uplift in their rates as the iron-ore price increased, and would receive a total of 25% of applicable positive net operating cash flows.