PERTH (miningweekly.com) – Iron-ore miner BC Iron on Thursday announced it would terminate its mining contract with project house Watpac early in an effort to save between A$2/t and A$3/t in costs.

The junior told shareholders that current market conditions and the competitiveness and pricing seen in the recent Warrigal hub contract tender had convinced the company to exercise its early termination rights over the mining, crushing and screening contract with Watpac.

The contract, which was initially slated to end in September, would only run until July, with BC Iron and its joint venture (JV) partner at the Nullagine project, Fortescue, liable for a one-off contract termination payment.

The JV would purchase second-hand equipment, including a surface miner, a two-million-tonne-a-year mobile crushing and screening plant, and four trucks, which would continue to operate at Nullagine.

The JV would pay the A$4.8-million asking price for the equipment in the 2016 financial year.

“Watpac was the inaugural mining, crushing and screening contractor at the Nullagine JV and has supported the operation from start-up through to steady-state operation as an important partner to BC Iron,” MD Morgan Ball said on Thursday.

He noted that the early termination of the Watpac contract, and the purchase of the equipment, would translate into a cost saving of between A$2/t and A$3/t at the Warrigal hub, compared to other mining areas within the Nullagine project.

Ownership of the surface miner in particular was expected to provide BC Iron with greater flexibility in structuring any new contracts, and would reduce inbuilt capital-related operating charges at the site, Ball said.

The benefit of this strategy would likely be seen in the 2016 cost guidance, he added.

In the meantime, BC Iron has reaffirmed its 2015 C1 cost guidance of between A$47/t and A$51/t, with the miner expected to produce between 5.2-million tonnes and 5.6-million tonnes of ore.