Atlas Iron Ltd. (AGO.AU) said Tuesday it has started iron ore off-take talks with potential customers from China, Taiwan, Japan and Thailand for its Wodgina project in Western Australia, and could keep its current "mutual fairness" iron ore pricing system.

The Perth-based miner has sold all production from its Pardoo mine for the next three years, using a system based on the annual benchmark system, but one that also incorporates clauses that account for changes in the spot market, Managing Director David Flanagan told reporters at the Diggers and Dealers forum.

Pardoo is scheduled to produce 1 million tons of iron ore during 2009, rising to 2.5 million tons in 2010.

The long-standing annual benchmark system is losing its place as the predominant pricing system, with producers and consumers increasingly moving to a more flexible system that allows for changes in prices during the year.

The majority of seaborne iron ore trade is still priced using the benchmark system, but BHP Billiton Ltd.'s recent announcement that it has sold about 30% of product on a mix of spot, quarterly and index-linked basis has prompted analysts to predict benchmark pricing may soon be redundant.

"We would like to see less tension during iron ore talks," Flanagan said, referring to the drawn out negotiations with Chinese steel mills and dominant producers Rio Tinto PLC, BHP and Vale that still haven't concluded with the contract year starting on April 1.

"We currently have no benchmark, so we're selling on spot," he said.

Atlas Iron plans to boost output to 6 million metric tons a year by 2012, up from 1 million tons during 2009.

-By Elisabeth Behrmann, Dow Jones Newswires;

612-8272-4689, elisabeth.behrmann@dowjones.com