Emerging iron ore producer South American Ferro Metals Limited (SAFM) announced it has commenced production of iron ore from its Brazilian acquired project, the Ponto Verde Iron Ore Project. The production was possible thanks to an agreement South American Ferro Metals Limited had with Brazil’s LGA Mineracao e Siderurgia (LGA).

Under the terms of the agreement, LGA mines iron ore at Ponto Verde and trucks the ore to its own plant for beneficiation before selling it on to Vale and Brazilian steelmaker Gerdau. The agreement with LGA is due to be in place until 31st of December 2010, giving South American Ferro Metals Limited time to commission its own plant at the Ponto Verde site.

The agreement with LGA delivers early cash flow to South American Ferro Metals Limited and allows the company to benefit from ongoing strength in iron ore demand. Initial testing of the iron ore being produced at Ponto Verde has also delivered encouraging results in terms of iron content, said the firm.

This production coincides with the readmission of South American Ferro Metals Limited’s shares to the Australian Securities Exchange under the code SFZ, following the company’s $15 million capital raising, which closed oversubscribed and was led by Patersons Securities Ltd.

SAFM Managing Director Stephen Fabian said South American Ferro Metals Limited has moved quickly to bring the Ponto Verde Iron Ore Project into production following receipt of the Definitive Operating License earlier this month. This agreement with LGA is a significant milestone for SAFM, allowing us to start generating revenue while at the same time giving us time to complete the commissioning of our own processing plant, which we expect to achieve in the coming weeks, he said.

Initial production results from Ponto Verde have been encouraging and the iron ore products being delivered have met with a favorable response from customers, added Fabian. While production has started, South American Ferro Metals Limited is focusing on commissioning its own facilities on site, as well as working with Coffey Mining to convert the existing resource at the site to a JORC-compliant resource, said Fabian.

The Ponto Verde Iron Ore Project has an exploration target of between 140 million and 150 million tonnes  of Haematite-rich Itabirite in a range of 33% to 41% Fe in situ, upgradeable to 60%+ Fe, and shares a common boundary to ground held by Brazilian mining giant Vale. The project includes an existing plant which is capable of producing 1 million tons per annum.

16 Nov 2010.