PERTH (miningweekly.com) - ASX-listed Iron Ore Holdings (IOH) has entered into an agreement with fellow-listed Mineral Resources which could result in the early development of its Iron Valley project, in Western Australia.

The two parties have also executed a mine-gate purchase agreement for ore extracted from the mine.

Iron-ore major Fortescue Metals recently pulled out of the joint development of the Iron Valley project, citing a diverging development focus following the recent market volatility, and an agreement that Iron Valley's and Fortescue’s Nyidinghu project would not be developed as an integrated mine in the timeframe originally contemplated.

Mineral Resources has agreed now to develop the mine on IOH’s behalf, with operations expected to start within six months after receiving final mining approval.

IOH would be responsible for securing mining approvals, as well as other statutory items, while Mineral Resources would have the responsibility of securing the operating approvals.

Construction was expected to start early in the third quarter of this year, with production ramp-up expected to take place over three to four years, depending on the economic conditions and the availability of infrastructure and supply chain resources.

Mineral Resources would further be responsible for operating the mine and buying a minimum annual tonnage of product from IOH. The term of the arrangement with IOH, subject to extension, was the lesser of 20 years or 200-million tons of product purchased by Mineral Resources.

“Entry into this agreement with IOH provides the opportunity for both companies to work to their strengths. It further cements Mineral Resources’ presence in the Pilbara iron-ore region and provides the opportunity to expand its iron-ore business,” said Mineral Resources MD Chris Ellison.

He added that the IOH agreement provided the company with access to a substantially increased resource base in the region, complementing its own current iron-ore and manganese operations, including the Phil’s Creek and Poondano mines.

IOH MD Alwyn Vorster noted that the transaction aligned with IOH’s business strategy of limiting its capital cost exposure and adding value through the de-risking of quality projects.

“The Iron Valley commercialization result is another major milestone for IOH and the transaction validates the company’s long-held assessment that the Iron Valley project, by itself, has a higher asset value than the value attributed to our entire company by the market in recent times.”

The Iron Valley project has a Joint Ore Reserves Committee reserve of 134-million tons, grading 58.5% iron, based on a mineral resource of 259-million tons.