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IMX Resources Ltd to lock in high iron ore prices with hedging deal

Last updated: 18:02 22 Nov 2010 EST, First published: 17:02 22 Nov 2010 EST

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IMX Resources (ASX: IXR) has moved to lock in high iron ore prices and fluctuations in the Australian dollar by initiating a modest hedging position together with Sichuan Taifeng for some of its iron ore production from the Cairn Hill Project near Coober Pedy, South Australia.

A total of 240,000 tonnes of iron ore over two years is to be hedged at A$124 per tonne FOB with Credit Suisse, which comprises 30,000 tonnes per quarter for calendar years 2011 and 2012 for 62% Fe.

The hedging pricing formula uses the same iron ore and freight indices used for the calculation of the iron ore pricing in the sales contract variation recently agreed with Jilin Tonghua Iron & Steel.

Credit Suisse is a global leader in the provision of iron ore risk management and the approval of the hedging facility by Credit Suisse is a strong vote of confidence in the Cairn Hill Project.

Duncan McBain, IMX managing director, said “the hedging represents a modest introduction to the iron ore hedging market to reduce the risk and reliance by the operation on iron ore prices and on fluctuations in the Australian dollar for shareholders.”

IMX Resources now has the funding in place to advance the Cairn Hill project, with the company fast tracking the phase 2 feasibility study, and early cashflows look set to be received with the first shipment of ore planned in December 2010.

The immediate upside for Cairn Hill remains the definition of further resources to support a long term 3-5mtpa iron ore operation. The project is close to the Darwin to Adelaide railway line and phase 1, which is currently under development, is a DSO magnetite project.

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