Under the contract, Viento subsidiary Viento Contracting Services (VCS) will mine, crush and screen around 2 million tonnes per annum of ore from the Warrigal hub over two years for 75% Nullagine owner BC Iron.

Viento will provide and operate load and haul crushing and screening equipment, and operate a second-hand Vermeer 1655 surface miner that the joint venture will purchase from Fortescue Metals Group, which holds the remaining 25% in the project, for $1.8 million.

Viento’s contract includes an option to extend dependent on the success of planned exploration at other Warrigal mesas not in the current mine plan.

Viento executive director John Silverthorne said the contract was a fantastic opportunity for the company and its subsidiary.

“This is an exciting opportunity for Viento to extend our capabilities beyond contracting and into contract mining and processing which has been the planned direction of VCS and in line with the experience of the VCS management team,” he said.

“The project will enable VCS to use its capabilities in materials processing, providing the complete service including running the continuous miners, loading, hauling, crushing and screening of the ore.”

The contract is expected to lower Warrigal cash costs by $2-3 per wet metric tonne. The joint venture’s free on board cash cost is now expected to be in the lower part of the $47-51/wmt guidance.

Guidance for all-in cash costs over the period has been revised from $54-61/wmt to $53-57/wmt.

BC Iron managing director Morgan Ball said the company would continue to target cost reduction at its operations through contracting.

“Our contracting strategy is key to our 2015 cost reduction efforts and it is pleasing to achieve meaningful savings for the Warringal hub,” he said.

“The pricing and competitiveness seen in the tender process provides comfort that further cost savings can be achieved through reassessment of the main mining, crushing and screening contract and the road haulage contract in the second half of 2015.”

The contract will commence in early April.

Lower costs have been a continued focus for BC Iron in recent times. The company cut jobs at Nullagine and its head office during December, leading to a workforce reduction of 15-20% but lowering its full year cost guidance.

Shares in BC Iron were up 2.4% this morning at 42c.