iron ore direct shopping pilbara 50 m cap, page-10

Magnetite verse hematite......a fair enough question johnlamp.

I have truely not seen anywhere a complete answer to the poignant question. I have been investoring in iron ore companies for 5 years and provide these comments.

POINT 1

It would cost $200 to $400 million to firstly produce magnitite slurry......and pipe the slurry to most West Australian ports. (costs include the pipeline) Magnetite mineralisation must be crushed, ground, screened and then magnetically separated to produce a concentrate. At this stage the concentrate is like fine powder....and therefore can only be moved in a slurry form. (thus the ned for pipeline).

POINT 2

Its costs maybe $700 million plus for this slurry to be converted into pellets which then can be direct feed t into Asian blast furnaces (steel mines). These smaller would be magnitite producers are very coy about telling the market of the additional costs (pellet plant) prior to their magnitite product finding a market.

POINT 3

Well how come ONESTEEL is using magnetite slurry to direct feed its stell mill in South Australia.

In actual fact, it cost the big company OST almost $400 million to convert their blast furnance to accept magnitite. And even then is was for a meager 4 mpta.
Nothing compared to output of some China mills. OST used all the resources and commenced the project 2 and a half years ago. Cost have gone through the roof since then.

You see....the problem is China mills can't accept the magnitite in the slurry form......its needs to be convertd to pelets first. Why not just keep buying hermatite..........(which feeds direct into furnances) from BHP. RIO.CVRD.

Accordingly I have a strong learning to companies like YML and UMC that are in the business of becoming hermatite (direct shipping grade iron ore). In buy opinion.....YML - right here/right now such have a intrinsic value than Atlas.

I will slip a copy of this post over onto the UMC thread.

_______________________________________________

Some other stories that help to support my views:

"The iron ore train is loaded

With prices on the rise, the scramble for new iron-ore deposits beyond the Pilbara is on, from Darwin to South Australia, writes Kevin Andrusiak | July 21, 2007
NOT that you might know it, but Fortescue Metals is not the only name hoping to crash the Rio Tinto-BHP Billiton sponsored iron-ore party and, equally, the Pilbara is not the only playing field.

An emerging breed of iron ore hopefuls are staking their claims across a broad arc of ground that begins near Darwin and extends right through Western Australia and well into South Australia.

There has never been a better time in history to be part of the iron ore industry, and the reason for that is as simple as they come.

It's all about China and India and billions of people becoming economically industrialised and demanding huge quantities of iron ore to feed their steel mills.

Where once a ticket on the iron-ore train could only be purchased with a sizeable hematite resource with grades above 60 per cent iron, these days it is so much easier.

Or so we are led to believe.

Making it even more lucrative to form an iron ore play -- and creating a near panic to get the ball rolling as soon as possible -- are industry forecasts that iron ore prices are again expected to rise for the sixth year in 2008.

Some analysts, including global banking giant UBS, have predicted contract prices will rise by 25 per cent next year.

Negotiations usually begin in earnest around October when the major producers BHP Billiton, Rio Tinto and Brazil's CVRD sit down with European and Japanese steel mills.

The agreed prices wash through the rest of the global steel industry and Chinese players, by far the hungriest of the lot, can do little but take the rises.

Where once the Asian mills dictated prices, the shoe is now on the foot of the iron-ore miners.

If uranium prices are a bit hit and miss at the moment, rampant iron ore demand is becoming somewhat of a constant.

The jewel in the domestic iron ore crown is the Pilbara.

BHP Billiton and Rio Tinto have locked up most of the high-grade hematite deposits where grades average more than 60 per cent.

However, given the demand from Asia, there is now billions to be made from processing the low-grade magnetite ore.

"There was a stage when you didn't bother selling iron ore below grades of 60-61 per cent," Pattersons' analyst Alex Passmore said.

"Now there's a market that has opened up for lower grade hematite ore.

"The Chinese steel mills can't go on forever using ore grading 20 per cent, it's too energy intensive to process it and the pressure is on to reduce greenhouse gases.

"The big question for the emerging players is getting a decent return on capital. Say they are looking at a minimum 8 per cent return, you've got to look at how much is it going to cost to rail the ore, how much it costs to mine it and so on."

Where gold can simply be carried to a mint in a suitcase, iron ore projects, particularly magnetite plays, require massive capital expenditure.

While most keen observers would know about the Fortescues and the Cape Lamberts in the Pilbara, few would be aware of the other hopefuls spread across the nation.

Take Aurox Resources, FerrAus and Echelon Resources in the Pilbara for example. Or Gindalbie, Midwest Corporation and Murchison Metals in the emerging iron ore province of the West Australian midwest.

Territory Iron in the Northern Territory and Grange Resources in the WA Great Southern are also worth noting for their unique locations.

And few would have heard of Centrex Metals who are exploring for iron ore on the Eyre Peninsula in South Australia.

Many of them have signed long-term agreements with Chinese partners desperate to secure future supplies.

A good example of why the low-grade magnetite deposits have become economic is Grange Resources.

Grange wants to pipe magnetite slurry from its Southdown project to Albany, in Western Australia, before shipping to a pellet plant in Malaysia and has identified a JORC resource of 479.1 million tonnes grading a touch over 37 per cent magnetite.

By processing the ore, Grange can produce a concentrate up to 69 per cent iron, just short of the 72 per cent, which is regarded as pure magnetite.

But Grange is a different kettle of fish. Its concentrate is aimed squarely at the needs of steel producers in the gulf countries such as Malaysia, which lap up the higher grade magnetite pellets.

"Five years ago, this project probably wouldn't have been economic," Grange technical director Alex Nutter said.

"It's a very simple process to upgrade the magnetite ore but it costs lots of money."

"Unless you have got the infrastructure, you can forget these kinds of projects."

But while the rising iron ore price has launched a new iron ore rush, it's not all beer and skittles for the juniors.

Those with a JORC resource stand the best hope of getting an early ticket on the iron ore train. But deficient infrastructure, a blight across the country on the resources boom, has the potential to create havoc.

And Midwest would attest to this. Midwest, which is partnered by Sinosteel, is hoping to be in production by 2012 at its Weld Range direct shipping hematite project.

Weld has a JORC resource of 132 million tonnes with an average grading around 55 per cent iron, but Midwest says there is potential for a 500 million tonne resource.

Importantly, the project requires a 360km rail link to Geraldton and the construction of a deepwater port.

This week WA deputy premier Eric Ripper told Midwest that he may terminate the Iron Ore Authorisation Agreement.

The point of contention is understood to be a clause stating that the company will build a railway, but the railway will be operated by the State Government.

Added to the infrastructure issue is the capital investment needed for the magnetite plays.

As Grange has found out, the processing of magnetite requires billions in capital investment to crush, grind and magnetically separate before turning them into pellets suitable for the Asian steel mills.

_______________________________________________
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Long haul ahead for magnetite miners
… the reality enunciated by the realistic Cleveland Cliffs could shatter the hopes of some would-be

Jamie Freed in Kalgoorlie

August 10, 2006

AN EXPERIENCED iron ore pellet producer has warned aspiring West Australian magnetite miners they are unlikely to get their projects into production within the next five years.

"I will be very straightforward and blunt about it," said Joseph Carrabba, the chief operating officer of US pellet producer Cleveland-Cliffs, on the prospects of companies such as Cape Lambert Iron Ore, Gindalbie Metals and Midwest getting into production. "It's going to be a very difficult thing to get these big projects on in a time that's reasonable."

Speaking after a presentation at the Diggers & Dealers mining conference, Mr Carrabba said the high costs of building magnetite processing plants when Rio Tinto and BHP Billiton had plenty of high-grade haematite ore left in the Pilbara now made pellets a less attractive proposition in the Australian market.

Cliffs entered the Australian market last year by buying about 80 per cent of Portman Mining. Portman is Australia's third-biggest haematite producer but its 6 million tonnes or so of annual output pales in comparison to the more than 100 million tonnes Rio and BHP each mine in the Pilbara.

Cliffs had tried to gain control of all shares in Portman last year but was thwarted by some shareholders who held out, believing the offer was too low. Mr Carrabba, who will become the chief executive of Cliffs next month, said his company was not interested in using "creeping" provisions to increase its stake in Portman right now.

There has been a lot of talk about consolidation among aspiring iron ore miners in Western Australia. Mt Gibson Iron made a hostile offer for Aztec Resources last month in a bid to become a company with a similar production profile to Portman.

Many commentators have expected Portman to play some sort of role in the consolidation process because it has operating experience and cash flows from production.

Mr Carrabba said Cliffs was happy to use Portman as a growth vehicle in the Asian market but the company was unlikely to be buying iron ore assets in Australia in the near term because they were relatively overpriced.

"We keep a very active watching brief just as everyone else in the business and we would love to have another asset in Australia," he said.

"They are very expensive assets as it stands now."

He added that Cliffs was not interested in magnetite projects in Australia - its focus in this part of the world was purely on haematite, which takes much less processing.

Additionally, Cliffs is considering an entry into the metallurgical coal business, to complement its iron ore assets. Portman has an experienced marketing team in Perth with good contacts at Chinese and Japanese steel mills that could help build a coking coal business in Australia.

Mr Carrabba said that Cliffs and Portman did not have any particular coal asset in mind at the moment.

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1154802960175-smh.com.auhttp://www.smh.com.au/news/business/long-haul-ahead-for-magnetite-miners/2006/08/09/1154802960175.htmlsmh.com.auSydney Morning Herald2006-08-10Long haul ahead for magnetite minersJamie Freed in Kalgoorlie{Business}BusinessNewshttp://www.smh.com.au/ffximage/2006/08/09/steelfactory_wideweb__470x311,0.jpgUp in smoke … the reality enunciated by the realistic Cleveland Cliffs could shatter the hopes of some would-be Australian miners.470311AP
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