African iron ore producer, Genmin Limited (ASX: GEN) has entered into a further non-binding Memorandum of Understanding (MoU) for a potential offtake agreement for Baniaka Green Fines, Lump and Pellet Feed iron ore products from its 100% owned Baniaka iron ore project, located in the Republic of Gabon, west Central Africa.
The MoU is with Valin Hongkong International Trade Co. Limited, a subsidiary of Hunan Valin Steel Co. Ltd, a listed, majority state-owned enterprise (SOE) engaged in the production and sale of steel products. It was founded in 1997 through the merger of several smaller SOEs and is headquartered in Changsha, Hunan province, China.
Hunan Valin is ranked inside the top 15 global crude steel producers with production of 26.4 million tonnes (Mt) in 2022 with a workforce of more than 23,000 employees.
We are privileged to have signed this MoU with Hunan Valin, a group of substantial balance sheet capacity that has shown long-term loyalty through the purchase of iron ore from FMG. We look forward to developing a similarly strong and long-term relationship with Hunan Valin,” Genmin Managing Director and CEO, Joe Ariti, said.
“With the signing of this MoU, Genmin now has potential sales of approximately 15 million tonnes of Baniaka Green iron ore products to be balanced over its production profile of five million tonnes per annum, which nominally provides sales coverage for the first three years of operations.”
In February 2009, Hunan Valin’s parent, Hunan Iron & Steel Group Co. Ltd completed an early investment in Fortescue Metals Group Ltd contemporaneously increasing its offtake volumes. Today, Hunan Steel is the second largest shareholder of FMG with an ~8.7% stake, valued at approximately A$6 billion.
On 15 December 2021 and 12 January 2022, Genmin announced it had signed non-binding MoUs with China Minmetals Corporation and Jianlong Group respectively, to sell and deliver 1.5Mt per annum (Mtpa) of Fines and 0.5Mtpa of Lump products for a term of three and two years respectively. Both the MoUs with Minmetals and Jianlong required that formal agreements be completed by 30 June 2023, otherwise they would lapse.
These MoUs have been extended with formal agreements now required to be put in place by 31 December 2024.
Genmin has to date signed non-binding MoUs with Minmetals, Jianlong and Hunan Valin. The potential offtake quantity is approximately 15Mt of Baniaka Green iron ore products for initial terms of either two or three years. The product demand is approximately 71% Fines, 24% Lump, and 5% Pellet Feed.