News: Charter Pacific Corporation partners with Mauritanian Government for DSO iron ore project

Charter Pacific Corporation (ASX:CHF) has attracted the Mauritanian Government as a 20% partner to its new hematite deposit containing direct shipping iron ore.

The successful bid was announced in late May. The hematite mining permit covers 995km2.

It is easy to see the reasons why the project was so compelling given it is such an advanced DSO iron ore project with infrastructure either in place or close to completion.

More than US$45 million has been spent on resource drilling, pre-stripping of the mine site, port preparation and haulroad build for the Legleitat Ore Deposit by the previous permit holder.

Operating costs are likely to be at the low end of around US$50 a tonne free on board which provides a strong profit margin even at current iron ore prices.

A pre-tax NPV of US$112 million was estimated by an independent third party based on an iron ore price of US$94/tonne.

The DSO is currently defined as a Inferred Resource of 12.2 million tonnes grading 59% iron (CaFe grade 62.7% Fe).

The plan is to establish a 1 million tonne per annum shipped operation for +10 years. However, this tonnage is likely to be significantly increased if other access routes can be opened.

The project also appeals as there is a likely short lead time to deliver product for shipping to market, possibly under 12 months.

WAFA Mining & Petroleum will also hold a 10% stake in the project.

Notably, Charter Pacific is in discussions with international commodity traders for an offtake agreement.

Preliminary estimates indicate a capital intensity of up to US$1.80 per tonne may be required to commence mining operations.

The majority of works to bring the mine to production will be conducted by contractors and consultants. Charter Pacific is building an in-country management team with the  skills and experience to prepare the mine site for production.

Not surprisingly, the DSO project with near term production potential is a cornerstone investment and focus.

Analysis

For a company modestly capped at circa $12 million, gaining a project with over $45 million spent on it - with most infrastructure in place and able to generate high profit margins at current iron ore prices is a prize for Charter Pacific.  Securing an off take partner is the next logical step which should be possible given the above.