iron ore is key

The key to Territory, which is still a truly modest iron ore producer with an even more modest resource base, is the combination of the freshly laid Adelaide to Darwin rail line that runs past the front door of its Frances Creek mine, and the port of Darwin which is super-keen to boost tonnage. “The Northern Territory government has been fantastic,” Kiernan told Minesite in his Perth office. “It has done everything possible to encourage us.” That’s all added up to the shipment of 350,000 tonnes of ore in the half-year to December, and a target of lifting annualised output to 2.5 million tonnes a year by the end of 2008, and then up to three million tonnes a year. Given that Territory is getting roughly US$100 a tonne in the booming spot market it’s easy to see why Kiernan is cracking the whip over his crew to squeeze maximum production from the mine.

“We’re making a pretty good margin right now with costs running at A$60 a tonne,” he said. “The aim is to get that down to around A$40 a tonne because it’s likely that the price will fall over the next few years.” Kiernan’s other aim is to boost his resource base from the current reserve of 4.8 million tonnes at 61.3 per cent iron, supported by an additional 9.7 million tonnes at 60.7 per cent in the resource category. A busy drilling programme is underway, prompting Minesite’s Man in Oz to comment that he had had this conversation with Kiernan 10 years earlier when he inherited control of the unloved Woodie Woodie manganese mine which at that stage needed someone to get the transport economics sorted and the reserve position boosted. “Spot on,” he said. “We’ve both been here before.”

Most small miners in Australia have not been where Kiernan, or Minesite’s Man in Oz, have been. Both have seen how markets fluctuate and how Blainey’s tyranny of distance is forgotten when a boom inflames optimism. As reality dawns, consolidation takes place and while Walsh can only rubbish the juniors yapping at his heels, Kiernan smells opportunity. “Quite clearly, the small companies which don’t have access to rail or port have a seriously hard road to travel,” he said. “They will have trouble getting up, and it’s just been made tougher by the sub-prime credit crisis.”

One man’s fish is another man’s “poisson”, as someone once said, and in Kiernan’s case cash flow from Frances Creek, plus strong financial backing from Richard Elman’s Noble Group, means that Kiernan might soon be on the takeover trail seeking to replicate his “train and port” iron ore formula. If that bit of speculation on the part of Minesite’s Man in Oz is correct then the names most likely to be on Kiernan’s desk are Atlas Iron and BC Iron. Atlas because it is “just up the track” from Port Hedland, and BC because it is about 30 kilometres from the new Fortescue Metals rail line. Whether Kiernan chooses to move on Atlas or BC is an interesting debating point, as is the fact that BC is chaired by his brother, Tony. Food for thought!