mike interview 2 feb

Thursday, February 02, 2012
ONE OFF THE WOOD: BC Iron managing director sidled up the bar into The Roadhouse this week to give us some insight as to what's happening at the Nullagine irn ore project.



You recently confirmed Direct Shipping Ore mineralisation at the Bonnie Creek deposit. Was this expected news?

Bonnie East has been known to us since we drilled the Nullagine iron ore project resource. It has always been in the Inferred category and to bring it into Reserve we needed to bring it up to Measured or Indicated.

We finally got to drilling that up last year. It took us a while to get around to doing it because we did have a few other things on the go, such as starting an iron ore mine, which some people might be surprised by how much time that can take.

What do the new Bonnie East numbers bring?

It stands at 8.6 million tonnes of Direct Shipping Ore in the Inferred category and our latest round of infill drilling has confirmed all of that to be there.

We have carried out a mining study on the inferred material, all of which went into a pit design, so I would expect to convert that directly to Reserves, which will add another year at least, to our mine life.

Where does Bonnie East fit into your mining schedule?

The important thing to note about Bonnie East is that it is right next door to Outcamp.

We are currently in the middle of year two of our schedule, so by year five we should be moving to a deposit called Coongan.

Coongan is about eight kilometres away with a higher strip ratio, which increases our mining costs.

In any mining operation, what you ideally want to do is carry out all your low-cost operations upfront, to maximise its value.

So with Bonnie East situated adjacent to where we are currently mining at Outcamp, it becomes a higher priority than Coongan, which will now move out a year in the schedule.

It’s interesting to look at your project in terms of the new areas we’re talking about, such as Bonnie East and Coongan, as many people might possibly consider BC Iron to be the Outcamp mine and that’s it.

Outcamp accounts for about half of the project’s Ore Reserve. Wally, you’ve been to site and stood on Outcamp. When you look to the northeast from there you see the line of mesas stretching off several kilometres into the distance called Warrigal Well; part of the reserves.

There are 105 kilometres of channel that we have drilled, from which we have established seven or nine kilometres are mineralised.

Is it all DSO?

We do have a lot of low-grade ore. When I say low-grade, I mean sub 55 per cent but higher than 50 per cent iron.

Some of that has carbonate in it, which means it can’t be easily upgraded, but some of it actually just contains fine sized clay and we think that may be amenable to upgrading.

For example, from the Outcamp deposit we have 10 million tonnes of this that is destined to be mined as waste, but if we can beneficiate it from low fifties to high fifties percentages we can extract value from it.

Are there any plans to expand the BC Iron portfolio?

If we are to really grow as a company the only way to do that is through acquisitions.

We held a strategy sessions late last year and the really important thing to emerge from that was that we have confirmed ourselves to be an iron ore-focused company. We want to grow, but having spent five years building up exceptional value, we will be a bit picky re: the next project!

There was some press speculation late last year that you were having a look around at different projects?

That wasn’t speculation. I said it, back in October; I said we were looking at other commodities. Part of the reason I did that was a fishing expedition to see what the reaction might be and to see what may be out there.

As it turned out there was a project we could have looked at but our shareholders, by and large, said to us they liked things the way they are.

They said, ‘we really like you guys, because you’re so simple. You mine iron ore, you have ‘X’ tonnes, you get ‘Y’ price, and your costs are ‘Z’. You throw other metals into the mix it makes it complicated’.

One thing that resonated with me was when one of our New York-based shareholders said, “You let us do the diversification. We like you because you’re simple”.

I want to make it clear that they were talking about the company - not me.

Are you sure about that?

I’m pretty sure, although he was pointing at me when he said it…

So we took that on board and considered what our strengths are and what we have learnt about iron ore over the last five years.

We like operating in Western Australia but having said that we’re not limited to WA. We’re looking at all manner of projects.

What is your order of preference?

Our preferences are Western Australia, Australia then overseas. Then we’re looking at hematite DSO, then at BBSO.

What is BBSO?

Beneficiate Before Shipping Ore. You will see people use the term Benificiated DSO, and that’s wrong.

So is this term directly from the Mike Young glossary of mining terms?

Yes it is, and you can be the first to put it in print.

It’s either DSO or it’s not. DSO means you dig it, you put it through a plant and everything you put through the plant goes on a ship.

If anything goes out the back end of the plant – that’s beneficiation.

I call that BBSO, so it’s not misleading.

Your relationship with FMG is still strong?

It is one of the things I’m most proud of. When we did the deal we got a lot of bad press, yet today we are making money and the value of the project has more than doubled since we struck the Joint Venture.

So we have been able to leverage off the upside by doing a JV that people said, at the time, was silly.

A lot of others who said we were silly are no closer to production now than what they were back then. I am proud that from year one, from day one, we have stuck to our goals and accomplished them.