multi-billionaire mining magnate Gina Rinehart gets into magnetite with iron ore deal, page-3

Hancock Prospecting is making a big move into magnetite iron ore, this week inking an initial $9 million deal to farm into the Mt Bevan iron ore project owned by juniors Legacy Iron Ore (ASX:LCY) and Hawthorn Resources (ASX:HAW).

It’s an interesting move by multi-billionaire mining magnate Gina Rinehart.

Her bread and butter has been in bulk shipping hematite iron ore mines up in the Pilbara through Roy Hill, a private 60Mtpa producer and exporter.

Legacy has been drilling for shallow extensions of Juno Minerals’ (ASX:JNO) nearby Mt Mason hematite resource.

But the bigger prize at Mt Bevan, around 250km north-west of Kalgoorlie, is its indicated and inferred magnetite resource of 1.17Bt at 34.9% iron, the kind that gets processed into high grade concentrate.

What do you think of this deal Gina?

“Hancock recognises the shortage of staff Australia wide disrupts many projects and delays supplies.”

Uh, OK.

“We are a supporter of the government changing its policy where pension arrangements are concerned, so that pensioners can work should they so choose, without onerous tax resulting from their decision to work.”

Excuse me, what?

“Hancock is a very patriotic company that supports investment in Australia, primary industries and jobs in WA and Australia. When Mining does well, Australia does well.”

Hancock deal moves the needle for Legacy, Hawthorn

Magnetite projects are normally costlier to build than hematite mines due to the need to process the ore into a concentrate.

So why are they in focus for big iron ore producers like Hancock and Fortescue (ASX:FMG), which is partnering with steelmaker Formosa Steel to develop the ~US$3.5b Iron Bridge magnetite mine, especially at a time when iron ore prices appear to be falling?

The main reason is grade. Higher grade iron ore products are receiving large proportional premiums compared to index prices, given they are cleaner, more efficient and cheaper to process, and can be used in lower emissions steel making processes like direct reduced iron.

That means they will likely be better suited to the priority steelmaking technologies of the future than lower grade ores that have catered the insatiable appetite of China’s blast furnace fleet.

Yesterday benchmark 62% fines, similar to the product produced by BHP and Rio Tinto in the Pilbara, was fetching US$89.05/t according to Fastmarkets MB. By contrast, 58% fines were selling for just US$61.99/t while Brazilian 65% fines attracted US$104.10/t.

Higher grade magnetite concentrates or pellets like those produced by ASX-listed companies such as Champion Iron (ASX:CIA) and Grange Resources (ASX:GRR), would trade at even higher premiums.

“The Mt Bevan project is an excellent opportunity for Hancock to further grow its portfolio in the iron ore business with higher grade, lower impurity iron ore products,” Hancock CEO Gary Korte said, acknowledging the role of grade in the deal.

“We look forward to working with the JV partners Legacy and Hawthorn to undertake the work programs and studies necessary to support a final investment decision.”

The agreement will give Hancock a 30% stake, with Legacy – ultimately backed by India’s largest iron ore producer NMDC – and Hawthorn sharing the rest 60-40.

It has sent the juniors’ shares up like a rocket over the past two trading days, with Legacy an astonishing 150% higher in a week.

Hawthorn, which counts among its major shareholders China’s Feng Hua at 36% and former Patrick boss Chris Corrigan of Waterfront dispute fame at 16%, is up more than 75% since the announcement.

Both have been more focused on gold than iron ore in recent times.