India Globalization Capital, a materials and infrastructure company operating in India and China, today announced that the company entered into an iron ore sale and purchase agreement with Mon Resources International LLC. Mon Resources is a supplier of iron ore produced in Mongolia. Encompassing an aggregate shipment of up to 126,000 metric tons of iron more, the contract is effective through December 31, 2013, and can be extended via mutual agreement.
The agreement states that IGC will purchase an aggregate of 126,000 metric tons of 54% Fe content ore which is to be delivered to the IGC hub at the border of Mongolia and China. The ore will then be beneficiated to 66% Fe content, which is then sold to the steel mills, by IGC's subsidiary in China. With an expected shipment commencement date set for August, the agreement is expected to yield a projected aggregate revenue of between $10 million and $12 million, based on current pricing, and favorable profit margins.
Ram Mukunda, CEO of IGC, stated, "This order stems from the successful 300 MT test shipment and the establishment of a shipping hub at the border of Mongolia and China, both of which were announced in the past months. This ore serves as the raw material for the beneficiation plants that can process it into 66% plus ore that is then sold to steel mills in China. As the ore already has 54% Ferrous (Fe) content, processing it to a higher grade creates greater efficiencies and a lower cost basis and as a result higher margins. Even based on today's relatively low pricing environment for iron ore, we expect this transaction to result in meaningful incremental profitability. As pricing firms up later in the year as many anticipate, we expect to generate potentially significant profitability."
Mukunda continued, "We are excited about our relationship in Mongolia. This establishes our network in Mongolia, where we are one of the first U.S. companies, and where we see considerable 'first-mover' acquisition opportunities. Our plan is to consolidate iron ore mines and beneficiation plants in the Inner Mongolia and Mongolian region, emerging as a leading provider of iron ore to the steel industry. The iron ore mining industry is highly fragmented in that area and as the first U.S. public company in this extremely mineral rich area, we have a large and exciting entrepreneurial opportunity to create significant value for our shareholders."
The results of the recent presidential election in Mongolia provided further encouragement for building IGC's portfolio there, cited Mr. Makunda. The recently elected president's platform is focused on integrating Mongolia into the global economy and has sought to use Mongolia's vast mineral wealth to bring foreign investment into the country while also ensuring that Mongolians profit from it as well. Through his actions, IGC and private companies like it were encouraged to invest in Mongolia following the amendment of the country's Foreign Investment Law by the Mongolian government. This amendment allows companies such as IGC to acquire equity in businesses based in Mongolia without the need for Cabinet or Parliamentary approval.
For more information on India Globalization Capital, please visit www.indiaglobalcap.com
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