Australasian Resources View the Brochure A pivotal year for a pioneering company
Australasian Resources Limited, a West Australian mining company focused on developing its iron ore project in Pilbara, a mining hotspot in West Australia, had a big year in 2006.
Although the company initially listed on the Australian Stock Exchange in 1984 as Central Kalgoorlie Gold Mines, then became known as Sherlock Bay Nickel Corporation Limited, this was the year that it was re-named Australasian Resources Ltd (ASX code: ARH).
That same year Andy Caruso, Managing Director, came on board, and the company shifted its major focus to iron ore as a result of expected increasing and consistent demand from China.
Caruso spoke with IRJ about ARHs continued iron ore focus, its development of the Balmoral South Iron Ore project (BSIOP) through its wholly-owned subsidiary International Minerals Pty, and the future of this exciting venture.
Acquiring the BSIOP
Caruso says that ARH acquired International Minerals Pty Ltd from Mineralogy Pty Ltd, a company 100 per cent owned by Professor Clive Palmer, in January 2007.
The acquisition was a scrip deal which resulted in ARH issuing shares to Professor Clive Palmer which gave him approximately 66 per cent of the listed shares in the company, he recalls.
International Minerals Pty Ltd has the contractual right to mine one billion tonnes of magnetite iron ore from the Susan Palmer deposit within the Southern Block of the Balmoral resource.
Caruso says that according to section 18 of the JORC code, the Balmoral area mining and exploration tenements (owned by Mineralogy Pty Ltd) are estimated to contain 60 to 100 billion tonnes of potential iron mineralisation.
In March 2007, a project agreement was signed with entities associated Shougang Corporation (one of the larger steel producers in China) which covered the joint development and potential funding of the Balmoral South Iron Ore Project, he explains.
This deal also includes a share subscription agreement which resulted in an injection of A$56 million into ARH in consideration of the issue of 56 million shares in ARH to two entities associated with Shougang.
During 2007 and 2008, the company completed a Bankable Feasibility Study in association with Shougang, the results of which confirmed that the project could be technically and economically viable.
After detailed negotiations however, the project agreement with Shougang lapsed in July 2009. Discussions continue with Shougang on project development and financing along with other interested parties from Asia, Caruso says.
The companys market capitalisation is currently around A$220 million after being less than A$100 million in late 2006.
Developing the BSIOP
Today ARH is focused on developing the BSIOP through International Minerals Pty Ltd and Caruso explains that this area of Pilbara, Western Australia, is already bustling with mining development.
BSIOP is located approximately 80km southwest of the town of Karratha and 30km from a port currently under construction by CITIC Pacific Mining Management Pty Ltd (CPMM) at Cape Preston, he says.
CPMM is developing the Sino Iron project which is located next to BSIOP (see above map) and have acquired rights to mine 2 billion tonnes of Iron Ore from Mineralogy Pty Ltd with an option for a further 4 Bt.
Caruso says that International Minerals has the rights for mining and processing one billion tonnes of magnetite iron ore to produce 300 Mt of high quality product over a 25 (12 Mtpa) year period. This product is planned for major steel markets in Asia and India and enjoys an ideal location for this.
In order to produce 12.0 Mpta of iron ore product, the mine must excavate approximately 40 Mtpa of raw iron ore and move, on average, another 30 Mtpa of waste material. The proposed total tonnage excavated per year would make Balmoral South one of the largest mine sites in the Pilbara, Caruso says.
In addition to the mining operations, a purpose-built magnetite concentrator is set for construction on the coast at Cape Preston. This will include a pellet plant and export facilities, all supported by a 250 Mega Watt combined cycle gas fired power plant.
The project infrastructure represents a US$3 billion dollar investment in the future of the iron ore industry in Western Australia, Caruso says.
The project is working towards final ministerial approval in early 2010 after a positive Environmental Protection Agency (EPA) Report (following the Balmoral South Iron Ore Projects Public Environmental Review (PER) process) was received in October 2009. The report confirms the project can be managed to meet the EPAs environmental objectives and recommends Ministerial approval be given.
BSIOPs access to existing and planned infrastructure, including its proximity to a port, coupled with attaining environmental approvals, signals that this project is certainly something very special.
Caruso says that ARHs 2010 goal is to obtain project and development finance (around US$3 billion) via a strategic investor. This will be done in two particular ways. Firstly, by offering an equity percentage in ARHs project company, International Minerals Pty Ltd, in exchange for project financing proposal and a 100 per cent off-take of iron ore products. Secondly, through a structure deal to meet ARHs project development requirements to maximise value to its shareholders.
2010 shapes as a pivotal year as the company seeks to see the BSIOP enter the construction and development phase, he says.
The iron ore market remains buoyant with continuing strong demand from China seeing spot prices for fines exceeding US$100/tonne. The company is well positioned to enter this market once funding is obtained and continues to be in discussions and negotiations with several parties to achieve this objective.
Within three years after financing, ARH plans to commission the BSIOP and commence production. As Caruso rightly points out, 2010 will be a tell-all year for Australasian Resources.
ARH Price at posting:
47.0¢ Sentiment: Buy Disclosure: Held
