The sales agreement is expected to provide Chinese end-users and smelters with “efficient access” to zinc concentrate, Australian-Chinese miner MMG said on Monday August 20.

“China is an important market for zinc concentrate and the CMC Group has investments in several major Chinese zinc smelters which are in a position to process Dugald River zinc concentrates. CMC also has trading relationships with other Chinese zinc smelters which may process Dugald River zinc concentrates,” MMG said.

MMG proposes that the maximum amount payable by Minmetals North-Europe under the agreement is $50 million.

The duration of the contract is from August 20 for sales during 2019 and 2020 until all obligations of both parties are completed.

The terms of the agreement were arrived at after arm’s length negotiations between MMG Dugald River and Minmetals North-Europe and these terms are in line with prevailing market rates and conditions for comparable zinc concentrates, MMG said.

MMG is majority owned by CMC, while Minmetals North-Europe is an indirectly wholly owned subsidiary of CMC.

Prices shall be calculated based on agreed amounts of zinc contained in the zinc concentrate from the Dugald River mine in the Australian state of Queensland at the special high grade settlement price for zinc as quoted on the London Metal Exchange; and silver contained in the product at London Bullion Market Association Silver Price spot quotation, each averaged over the agreed quotational period; less an agreed treatment charge which is consistent with those charges prevailing for comparable zinc concentrate contracts.

At the end of July, Metal Bulletin’s assessment for domestic zinc concentrate treatment charges (TCs) for southern China was at 3,400-3,600 yuan ($496-525) per tonne on July 27, and the assessment of TCs for northern China was 3,600-3,800 yuan per tonne on July 27 – both on a delivered basis.

Metal Bulletin’s spot zinc concentrates TC for cif Asia Pacific was $65-75 per tonne on July 27, up from $20-40 per tonne on June 29.

Shipment shall be arranged by the seller from a delivery point nominated by MMG Dugald River to the place of final destination nominated by Minmetals North-Europe on a cif basis.

MMG produces and sells metal products, including copper, zinc and lead concentrates. As part of its ordinary and usual course of business, the company sells some of its products to the CMC Group at prices and on terms which are consistent with prevailing market rates and conditions for the relevant products, it said.

Separately, MMG released its half-year results on August 20.