Is part of the reason why FMG are at Vulcan because they are looking for better grade deposits of magnetite that can actually produce higher grades once processed? compared to what they have in the Pilbara?
While magnetite is generally of a substantially lower grade in the ground, it actually produces higher grades once processed and is a significant component of higher grade pellets and concentrates needed to fuel the direct reduced iron plants that will be key to low-emissions steelmaking.
Pilbara ores most at risk
The Pilbara region in WA is a geological marvel, already yielding over half a century of its bounty and it’s still the source of around half the world’s iron ore supply.
But with iron ore delivering $150 billion in Aussie exports last year, it has also emerged as one of the country’s biggest vulnerabilities.
Although the transition to zero emissions steel is feasible – BloombergNEF says it’ll need some US$278 billion of investment by 2050 – iron ore producing countries face challenges that go beyond funding, especially Australia.
“Australia, however, currently produces lower-grade ores, and could lose its number one place in the supply chain, if it does not invest in equipment to upgrade its product,” BloombergNEF commented.
Attempts to identify large, high-grade iron ore deposits in the Pilbara have largely been fruitless.
“Iron ore grades from Australia now average around 60%, well below the industry 62% benchmark,” Eames said.
“(Brazil’s) Vale has indicated that the world’s remaining ore bodies face depletion and beneficiation challenges, thus making it difficult to increase supply of high-grade ores.”
Eames says the traditional model has issues around quality, sustainability and competition.
“The quality of DSO is directly related to the quality of iron ore in the ground and over time, a number of orebodies have become exhausted and quality has declined,” he said.
“Steelmaking based on coking coal faces obvious environmental challenges. A supply model dominated by a small number of suppliers has raised concerns with some customer groups.”
Australia and Brazil’s direct shipping ore projects have dominated the global iron ore landscape due to their low costs and reliable supply to coke-based blast furnaces, largely in China. Eames points out that attempts to beneficiate and produce higher-grades have been largely unsuccessful.
“Some ore processing (or beneficiation) has been introduced in DSO operations, but this has partially offset declining grades rather than improving quality,” he says.
“Miners have invested in higher-grade processed ore operations (such as Rio Tinto in Canada, Anglo in Brazil and more recently FMG in Australia) but have not always faced a smooth development path.
“Efforts to develop other iron and steelmaking approaches have not captured a lot of market share to date and past investments by Rio in HIsmelt and BHP in HBI (hot briquetted iron) have not proved successful.”
Magnetite projects stand to benefit from the shifting sands
There are two main types of minerals in iron ore deposits sold in the commercial seaborne iron ore market.
The first is hematite, which has high in-situ grades of high 50s to mid 60s in iron content, and is the cheapest to develop and operate at large scale, making it the mainstay of the current iron ore market.
The second is magnetite. While magnetite is generally of a substantially lower grade in the ground, it actually produces higher grades once processed and is a significant component of higher grade pellets and concentrates needed to fuel the direct reduced iron plants that will be key to low-emissions steelmaking.
SIMEC’s South Australian magnetite operations has been providing the feedstock for the nationally significant Whyalla Steelworks. https://unauthorised investment advice/wp-content/uploads/2021/12/Pic-Manfred-GottschalkStone-via-Getty-Images.-300x168.jpg South Australia has emerged as an ideal location for modern iron ore mining, powered by the dense renewable penetration in its energy market. Pic: Manfred Gottschalk/Stone via Getty Images.
Investors can get in on the transition to high-grade
Eames says there are large iron ore deposits in Australia with the right combination of geology and infrastructure.
“Investors will find opportunities in a new generation of more sustainable, high grade iron ore operations that can assist Australia’s iron ore industry with the transition.”
“For investors, we are at the beginning of a substantial shift in the iron ore industry and there will be undoubtedly winners and losers over time as commodity and asset markets evolve.
“In the iron ore market, this transition would likely be accompanied by shifts to much higher premiums for higher-grade iron ore products (and potentially greater discounts for lower-grade ores),”he says.
“Existing iron ore businesses will be affected by shifting demand trends. And early investors in competitive resources that can deliver higher grade, sustainable iron ore products stand to benefit from the rewards.”
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