You and others are the thread are now getting the crux.
HIO management has dropped the ball technically, the new resource estimate announcement headline was very poorly written. It didn’t even say the Hawsons product is magnetite/ iron ore! Unsurprisingly it has been poorly received by the market.
Dropping cut-offs to increase tonnages at the expense of in-the-ground (ore) DTR grade and the magnetite product quality (decreased Fe and increased Silica) is a terrible strategic mistake that points to a serious lack of engineering street smarts.
Prioritising tonnage, which they have plenty of, at the expense of in-the-ground and product quality grade is dumb.
CAP and now HIO have been obfuscating about grade for years. The ‘ore’, the in-the-ground rock grade, of contained fine grained (< 38 micron) magnetite is fundamentally very low.
The low DTR grade is the projects biggest development hurdle and for years they have been attempting to compensate by focusing on the ‘ore’ softness and high utility product – “super grade”.
The current resource development strategy that degrades the compensating high-quality magnetite product exposes the very big DTR problem. The low DTR grade means Hawsons must be mined at a gargantuan scale to achieve significant magnetite production. This is a fundamental geological feature that can’t be easily overcome that the current resource development strategy is making worse. Why do this? It’s a major negative the management can’t be mute about and must explain to restore credibility.
Degrading Hawsons’ positives of softness and top quality product to achieve a higher resource tonnage risks making a challenging project impossible.
The new management at HIO did a good commercial job by consolidating ownership and securing funding but are now being exposed by a bad, dear I say naïve, engineering strategy.
Increasing the project objectives to 20 Mtpa magnetite production to be transported along a non-existent long distance pipeline, to a non-existent port, with a much bigger mine and plant, all of which is slower and more expensive to build, is pure fantasy.
HIO management has to get real, live strictly within the project means and get cracking. The clock is ticking faster. Simandou, with near magnetite-grade, direct shipping ore, capable of 200 Mtpa production is now scheduled for a 2027 start. It will kill magnetite start-ups not already in the market.
Going big from the start will sterilize Hawsons. A more modest and smart approach to the geology and engineering is required. The geological resource work must focus on optimizing DTR and product grade, not tonnage. The engineering work on utilizing existing infrastructure for product export.
A much smaller production of higher grade material utilising existing rail and port for export from a lower CAPEX mine is the only way to get the project promptly built, operating and proved to be money making. It can then be scaled-up and piped to new port once established in the market and earning cash.
HIO management are getting the engineering reality and strategic business fit badly wrong.
Its fine to ‘Think Big’ and Hawsons’ is scalable but the only pathway is starting smaller and using what you actually have, not what you wish you have.
HIO is currently engaging in a flawed grand fantasy that will kill the project.
Focusing on grade, not tonnes, using the serviceable and existing infrastructure and getting into production faster will give the project a chance. Anything else will result in failure.
HIO Price at posting:
30.5¢ Sentiment: None Disclosure: Held
