FCO, ICPO, LOI, SCO and SPA: The Commodity Trading Documents Explained

Why the document order matters

Almost every stalled mineral transaction we are asked to review has the same shape: documents exchanged in the wrong sequence, by parties who had not established that they could perform. A buyer sends a Letter of Intent to a broker who has never met the supplier; the broker returns a Full Corporate Offer for material he does not control; three weeks later everyone is waiting for a Proof of Product that will never arrive.

The documents themselves are conventional and useful. The problem is that in this trade they are frequently used as a substitute for verification rather than a record of it. Knowing what each one is, and what it does not prove, is the difference between a structured process and an expensive circular.

SCO — Soft Corporate Offer

A Soft Corporate Offer is an indicative, non-binding statement of what a seller believes it can supply: product, approximate quantity, pricing basis, delivery terms and validity. It is a starting point for discussion, not a commitment, and it is normally issued before any buyer documentation.

An SCO tells you what someone is willing to talk about. It proves nothing about ownership of the material, and a soft offer circulating between several intermediaries usually says more about the length of the chain than the availability of the metal.

LOI — Letter of Intent

A Letter of Intent is issued by the buyer, stating the product, monthly and total tonnage, destination port, preferred Incoterm, target pricing basis and the payment instrument the buyer intends to use. It is normally non-binding but it is a serious signal: it says a real buyer with a real requirement is at the table.

A good LOI is specific. Vague tonnages, no named discharge port, and no stated payment structure make a buyer look like an intermediary testing the market, which is exactly the point at which credible suppliers stop replying.

ICPO — Irrevocable Corporate Purchase Order

An ICPO is the firmer version of the LOI: the buyer confirms it will purchase on the stated terms, subject to the conditions set out. In practice its enforceability varies and much depends on the wording, so treat it as a commercial commitment that moves the process forward rather than a contract.

Some sellers ask for an ICPO very early. Providing one before you know whether the counterparty controls the material is putting your intent on paper in exchange for nothing.

FCO — Full Corporate Offer

A Full Corporate Offer is the seller’s firm offer, issued in response to buyer documentation. It sets out the specification, quantity, pricing formula and quotational period, delivery terms and schedule, inspection arrangements, payment instrument and the validity of the offer. It should be signed and issued on the letterhead of the company that will actually sell the goods.

This is the document most often misused. An FCO from a company that is not the producer, the producer’s authorised agent or a licensed trader holding the stock is not an offer in any meaningful sense. Before an FCO changes anything for you, confirm that the issuing entity is registered, that its export or trading licence is valid, and that it has the authority to sell the specific lot described.

Issued by

The seller, on its own letterhead

Binding

Firm for the stated validity period

Must contain

Specification, quantity, pricing formula, Incoterm, schedule, inspection, payment terms

Does not prove

Ownership of the goods, licence validity, or capacity to load

SPA — Sale and Purchase Agreement

The Sale and Purchase Agreement is the contract. It supersedes everything exchanged before it and governs the transaction: parties, specification, quantity and tolerance, pricing formula and quotational period, Incoterm under Incoterms 2020, inspection and assay procedure, weighing basis, payment mechanism and timing, documentary requirements, title and risk transfer, force majeure, default and dispute resolution.

Everything that matters commercially should be in the SPA and nowhere else. If a term was agreed in an email or an FCO but is absent from the contract, assume it does not exist.

The sequence that actually works

A workable order puts verification before commitment at every step, rather than after:

• Buyer defines the requirement: product, grade, tonnage, destination, Incoterm, payment structure.
• Counterparty is verified independently — company registration, licence status, authority to sell the lot, physical stock.
• Seller issues an SCO or, where the buyer has documented its requirement, an FCO.
• Buyer responds with an LOI or ICPO and company profile.
• Terms are negotiated and recorded in the SPA.
• Payment instrument is issued or the first milestone is funded, per the SPA.
• Proof of Product, inspection and assay follow the contractual sequence.
• Loading, documentation and shipment.

What none of these documents do

No document in this list proves that the metal exists, that the seller owns it, or that it can be exported lawfully. Those are questions of fact, answered by checking the company registry, the mining cadastre, the export permit and the warehouse — not by exchanging PDFs.

That is the order we work in. Verification first, paperwork second, funds last.