Mount Gibson Iron: Enters Agreement With Glencore International

Australian iron ore miner Mount Gibson Iron Ltd. (MGX.AU) will sell 48% of the ore from its planned Extension Hill mine to Swiss-based commodities trader Glencore International PLC (GLEN.LN), the Australian company said Monday.

Mount Gibson, which mines around 6.3 million tons of higher-grade hematite iron ore from its existing mines at Koolan Island and Tallering Peak in Western Australia state, said it would base pricing on market-based prices benchmarked to indexes issued by commodities service Platts.

"We anticipate concluding further agreements in respect of remaining unallocated tonnages shortly," Managing Director Luke Tonkin said.

Mount Gibson is Australia's second-largest pure-play iron ore miner, with 5.4 million tons of production in the year to June 30, but is a relative minnow next to giants like Rio Tinto PLC (RIO) and BHP Billiton Ltd. (BHP), which has made its marketing a gauge of problems in the global iron-ore trade.

The company suffered several cancellations of ore shipments from Asian traders in the immediate wake of the 2008 financial crisis.

Mount Gibson had previously planned to sell 80% of production from Extension Hill to Shougang Concord International Enterprises Co. (0697.HK) and 20% to APAC Resources Ltd. (1104.HK), which hold 14.28% and 25.85% stakes in the company, but discussions have fallen apart since April over pricing terms.

Mining has started at Extension Hill but port problems mean first shipments are only expected towards the end of the year.

-By David Fickling, Dow Jones Newswires; [phone]; [e-mail]