nice article about magnetite

Fortescue Metals Group revs up Pilbara ore drive
Matt Chambers
THE AUSTRALIANSEPTEMBER 28, 2015 12:00AM
Andrew Forrest’s Fortescue Metals Group has stepped up its plans for West Australian magnetite iron ore exports.

The miner has applied to build a facility at Port Hedland to ship 10 million tonnes a year of the premium steelmaking ingredient despite the chairman’s recent calls for iron ore restraint.

The application for approval came after chief executive Nev Power recently talked up the potential for increased demand and prices for magnetite iron ore, which is a processed, higher-grade product than the direct shipping hematite ore. Fortescue produces 165 million tonnes a year of hematite ore, a resource that is swamping the global market.

“One of the things we’ve seen happening — in the Chinese market in particular — is a lot of the production that’s been pushed out of the market domestically has been highly processed magnetite,” Mr Power told analysts after the company’s full-year result in August.

“As the steel mills use a greater and greater diet of imported hematite, we see an increasing demand, and premium that will be paid, for high-grade magnetite.”

The project, which Taiwanese plastics maker Formosa paid $US1.15 billion to join in 2013, could provide a new potential Pilbara region iron ore investment despite slumping iron ore prices and slowing Chinese steel demand.

The Iron Bridge joint venture between Fortescue, Baosteel and Formosa has now lodged approval application with the West Australian government to build a plant and a stockyard next to Fortescue’s existing Port Hedland operations, with construction planned for April next year and first exports from August 2017.

The government has called for submissions on the project from today until October 2.

The port infrastructure would be for the second stage of the Iron Bridge project.

The construction of a $US340 million ($485m) first-stage trial magnetite mine and processing facility that is targeting 2 million tonnes of magnetite concentrate production a year is now complete. The facility, 110km south of Port Hedland, is being commissioned now, according to the approval documents.

The multi-billion-dollar second stage, consisting of a 30 million-tonnes-a-year mine and a slurry pipeline to Port Hedland to export up to 15 million tonnes of magnetite concentrate annually, has government approval.

But, like the port facilities, it has not yet received board approval.

Analysts remain sceptical and generally give the project no value, given benchmark iron ore prices had slumped from $US130 to $US56 a tonne since Formosa joined the project and agreed, in August 2013, to fund the trial mine.

It is also not clear how Fortescue, which flagged selling assets to strengthen its debt-heavy balance sheet, could finance a second stage, making Iron Bridge a potential contender for an asset sale — if it is viable.

At the results briefing, Mr Power gave an upbeat view of the project’s potential, saying markets for magnetite, which is sold as high-grade concentrate or pellets, were more appealing than those for the direct shipping hematite iron ore that Fortescue, BHP Billiton and Rio Tinto have rapidly expanded into and where prices have slumped as a result.

This potentially different market is how Fortescue justifies pursuing the Iron Bridge project despite a campaign this year by Mr Forrest to curb the iron ore expansions of BHP and Rio.

Mr Power said there would also be Indian demand for magnetite ore, which is not expected for hematite ore.

“In the next two or three years we start to see those (magnetite) premiums (become) quite significant and it’s a market that really can’t be met very well by the direct hematite ores and therefore will put Iron Bridge in a very good position to supply those higher grades,” Mr Power said.

He did not elaborate on the economics of the project, where a trial would run until the end of the year, but said it was going “very well” with some minor teething problems.

In May, Fortescue’s development director, Peter Meurs, told a Melbourne conference that early studies showed a second stage looked viable.

The growing magnetite premium was evident in the June half results of Grange Resources, which exports magnetite pellets from the Southdown mine in Tasmania. While the prices received for its magnetite pellets fell 30 per cent from a year earlier to $US73.22 a tonne, the premium for benchmark hematite fell 46 per cent to about $US60.

Iron Bridge is 61 per cent-owned by Fortescue, 8 per cent-owned by Baosteel and 31 per cent by Formosa