Glencore has struck a deal to buy at least half of the output from Guinea's Forecariah iron ore mine as part of the commodities trader's drive to grab a bigger share of the lucrative market for the steelmaking ingredient.
The world's largest diversified commodities trader said today it had reached a deal with Bellzone Mining to buy its 50 per cent of output from Forecariah, a joint venture with China International Fund.
Bellzone's Chinese partner has "tag-along" rights, meaning it could also sell its slice of production to Glencore.
Commercial production at Forecariah, in one of West Africa's most promising but toughest iron ore regions, started in May. Production will be ramped up through 2012 to a rate of 3 to 4m tonnes per year, significant for the region though a fraction of the 1.1bn tonne global market.
The deal covers the life of the mine, allowing Glencore to benefit from a potential expansion to 10m tonnes.
Traders like Glencore and rival Vitol, which struck its maiden deal in March, have been piling into physical iron ore alongside traditional buyers like steelmakers, tempted by large volumes, an increasingly attractive pricing mechanism and China's appetite for steel to feed its growing cities.