India Globalization Capital, Inc. (NYSE Amex: IGC), a company competing in the rapidly growing materials and infrastructure industry in India, announced that it has closed on a strategic partnership agreement to provide iron ore to Chinese steel mills.
IGC entered into a strategic partnership agreement with Chinese iron ore mine H&F Ironman Ltd. to source ore from India. Ironman is a highly profitable Chinese company that mines ore inInner Mongolia, which it sells to steel mills in North East China. Ironman has several steel mills as customers. To memorialize this strategic partnership, Ironman will purchase $250,000 in IGC stock at a price of $.35 and IGC will buy a similar amount of stock in H&F Ironman.
Under the agreement IGC will source ore fromIndiaand ship the ore to H&F Ironman and their customers inChina. There are two approaches that are contemplated. In the first, IGC will ship 60+% Fe ore toChina, which will be sold inChina. In the second approach IGC will ship low-grade ore toChina, which Ironman will process through its beneficiation plant and convert it to higher-grade ore and sell that to its customers.
"We have been formulating a strategy to leverage our sourcing of ore inIndiaand this agreement provides us with a financially strong private equity backed partner inChinathat has deep industry experience and an excellent customer base. Ironman will be responsible for theChinabased customers and logistics. For example, they will make sure that the ore we ship is unloaded, passes testing inChina, is delivered to the customer and that we are paid. We expect to send samples of ore fromIndiaas early as next week to establish the process inChina," said Ram Mukunda, CEO of IGC.
As we have reported, Karnataka on the West Coast remains closed for the export of ore. IGC now is preparing to ship ore from theHaldiaPorton the East Coast of India. IGC will also establish a crushing site on the East Coast of India. Under this strategic agreement, IGC initially will send about $1M of ore per month and increase that amount quickly as the processes and logistics are put in place.
"We operate an iron ore mine inChina, we have 250 employees and extensive contacts in the industry. Despite reports of a slowing in infrastructure spending inChina, we continue to see considerable demand for ore from our customers. We believe that our partnership with IGC allows us to increase the supply chain to meet the demands of our customers," said Danny Chang, CEO of Ironman and Partner with Jasmine Capital. He added, "We see this as a long term strategic partnership that we believe will add significant shareholder value to both companies."
He concluded, "Iron ore pricing remains very strong in the range of $179 per Metric Ton (MT) up about 4% from January for 62% Fe. We believe we can sell as much ore as we can source." Vale recently said it expected iron ore prices to remain at about $150/MT for at least five years.
Based in Bethesda, Maryland, India Globalization Capital (IGC) is a materials and construction company operating in India. We supply iron ore to China and rock aggregate to the infrastructure industry in India. For more information about IGC, please visit the company's web site atwww.indiaglobalcap.com.
About H&F Ironman, Ltd.
Based inChina, Ironman mines a 20 square kilometer iron ore mine inInner Mongolia. It also operates magnetic separators used to beneficiate iron ore through a dry and wet extraction process that results in producing high-grade iron ore. The English language web site is under construction.