The LOI is submitted by the buyer or buyer's representative) for seller's review and reply or offer to sell.. The LOI contains the buyer's mineral specifications, quantity required, shipping and payment terms and target pricing (often not provided to leave price negotiations open). A properly completed LOI can expedite the agreement process and minimize misunderstandings. An LOI is a non-binding expression of interest to buy.  Ideally, the buyer's LOI would include the following documentation:

• Company registration documents
• Company profile / website reference
• Copy of import license / permit (if required)
• Copies of previous transaction documents
• Bank details for verification purposes

The SCO is issued by the seller or seller's representative setting forth the specifications, terms and conditions the seller is prepared to offer a prospective buyer. It is usually issued in response to an LOI but can be used to initiate the process. The SCO reflects what the seller / supplier is able to do and doesn't necessarily agree with the buyer's needs or requirements. A compromise is often necessary for the buyer and seller to agree. An SCO is a non-binding offer to sell. Ideally, the seller's SCO would include the foilowing documentation:

• Company profile / website reference
• Copy of relevant mining and export license / permit
• Copy of recent Certificates of Analysis (COA's)
• Copy of recent Bills of Lading (BL's) relating to COA's
• Bank details for verification purposes

The CPO is issued by the buyer in response to the seller's SCO as confirmation of agreement with seller's offered terms or general acceptance subject to certain changes or modifications.

The FCO is intended to set forth all terms and conditions under which the seller will sell and deliver the cargo to the buyer and often includes a draft contract attachment for the buyer's review and execution. The buyer may respond by issuing an Irrevocable Corporate Purchase Order (ICPO) in favor of the seller.

A draft contract is usually prepared by the seller in the English language incorporating terms, conditions, payment method, shipping and other important transaction details which have been previously agreed by buyer and seller. Additional details are included for payments, penalties and adjustments, quality inspections and shipping. Timely contract execution is critical since the passage of time may have significant pricing implications and jetty / berth availability. The draft contract may also be 'conditioned' on events / additional documentation (such as a satisfactory mine and facilities visit by the buyer).

If buyer and seller / supplier have no previous business relationship, the buyer usually requires a mine and facilities visit prior to finalizing the purchase and sale contract. The mine visit gives buyer and seller the opportunity to get acquainted and for the buyer to inspect / assess seller's ability to perform by visiting mines, processing areas, stockpiles and loading / jetty facilities.

A draft or pro-forma letter of credit from the buyer's bank (usually a SWIFT transmission) is commonly the trigger for the seller to provide a performance band / bank guarantee. Issuance of the draft LC also gives seller comfort in buyer's ability to financially perform if other forms of verification have not been provided.

For initial or trial shipments it is quite common for the buyer to require a performance bond / bank guarantee from the seller. Timing for issuance is usually upon rceipt of buyer's draft LC. These documents are usually issued by the seller's bank for an amount equal to 2% (typical) to 5% of the initial shipment value which enable the buyer to enforce / draw upon in the event seller fails to perform in accordance with the contract.

Once the seller and seller's bank have reviewed and agreed with the draft letter of credit, the final, fully operable, letter of credit is issued by the buyer's bank. For most contracts, the final LC activates and PB / BG issued and 'triggers' the miner's production process for delivery under the contract. Most miners / supplies will not confirm a laycan date until the final LC is received / activated.

The buyer's LC may, or may not, be confirmed as provided in the contract and reflected in the LC. Sellers generally require negotiation 'at any bank' or through seller's bank which may also be the LC confirming bank. If payment is restricted to the LC issuing bank in a country other than the cargo country of origin, extensive payment delays may result. If a funder / seller-funder is involved, issuance of the payment instrument allows for monetization of the payment instrument to cover production, logistics and concession costs.

Once the buyer's payment instrument is in place, the supplier commences the production and delivery process. The reason for deferring this proces until receipt of the buyer's payment instrument is that many cash / third party payments are required prior to buyer's payment. These payments might include some / all of the following:

• Trucking
  
• Equipment rental
• Private road usage fees
• Third party processing and stockpiling
• Jetty fees / deposits
• Concession payments
• Barging fees / deposits
• Fixture note deposit (up to 30% of freight charge)