Here is something to pick apart while we wait.
There’s a new plan to unlock a magnetite mining hub in WA’s Mid-WestFor almost 50 years, attempts to ‘unlock’ WA’s Mid-West magnetite iron ore province have failed.
Distance from port, and a lack of supply of water and energy made costs prohibitive for aspiring miners. The magnetite operations that did manage to get up and running generally performed poorly.
(There are two main types of iron ores – hematite and magnetite. Hematite is a higher grade in the ground, while magnetite deposits are large and quite low grade – but produce super high-grade products.)
Most recently, plans for a ~$10 billion rail system and deep water port called ‘Oakajee’ near Geraldton proved unviable as soon as iron ore prices retreated from their 2011 peaks.
Numerous high quality magnetite deposits in the region remain stranded, but small cap engineering service providerVerbrec (ASX:VBC)believes it has the answer.
Backed by heavy hitters like miner Anglo American and gas infrastructure owner AGIG, as well as private iron ore play and foundation shipper Cashmere Iron, Verbrec has developed a plan to unlock the vast magnetite iron ore deposits in the Mid-West.
An infrastructure fund would own everything outside the mine gate — gas pipelines, water pipelines, power, export hydro-transport pipelines and shallow water transhipping port, which mining companies would utilise for a fee.
Verbrec themselves would benefit from major project engineering work and possible long term operations and maintenance contracts.
A pre-feasibility study (PFS) on the initial 30 million tonnes per year project will kick off late Q4 FY2021.
“By working with AGIG we are treating this like a huge utilities project. We supply the miner everything they need – power, natural gas, water, and take away their ore for export,” says Verbrec’s Brian O’Sullivan, who first sketched out this idea with colleague Ian Gooding in 2014.
“It’s just like a utilities business, but on a grand scale.
“The shared infrastructure is crucial. If one miner tries [to go it all alone] it is completely uneconomical.
“We engaged with all the miners and project developers in the Mid-West. Cashmere has engaged with us as a foundation shipper for the first 30 million tonnes.”
In that region there are another five main proponents with advanced projects, O’Sullivan says.
But previous attempts to unlock this iron ore province have failed. How is this plan any different?
Firstly, the plan utilises slurry pipeline technology to transport the iron ore rather than rail – which is much, much cheaper to build and operate, O’Sullivan says.
“The second thing is instead of building an $8 billion deep-water port at Oakajee we are using small harbour technology,” he says.
“You can very cheaply put in a small harbour with shallow draft feeder vessels. These vessels are loaded directly [with ore] and run straight out to what we call a ‘floating harbour’.
“The ocean-going vessels come alongside, latch to the floating harbour, are loaded quickly and are off.
“That works really well up to about 90 million tonnes [per annum].”
Importantly, this project doesn’t need high iron ore prices to be viable. At $US80/t it’s very robust, O’Sullivan says.
“We all know that $US230/t is not going to last,” O’Sullivan says.
“Intuitively I know that we can sustain a very low ore price, but as part of the PFS we will validate how low prices can go.
“We are going to build this project, because it makes sense. We don’t need $US230 per tonne iron ore price to make this work.”
Who could benefit?
It’s still early days, but there are a number of small caps in the region who could potentially benefit from this development, should it happen. Here’s a verynon-exhaustive list.
Juno – spun out from Jupiter Mines (ASX:JMS) — owns the Mt Mason hematite project and the Mt Ida magnetite project in WA’s Yilgarn region.
Mt Mason is a near term development opportunity. Mt Ida is a larger, longer-dated proposition, hosting a resource of 1.85 billion tonnes at 29.5% iron on a granted mining lease.
Juno managing director Greg Durack believes it has thepotential to be a tier one magnetite mine “and will benefit from learnings drawn from other magnetite ventures currently being pursued in WA”.
Legacy iron
Right next door to Mt Mason is Legacy’s Mt Bevan magnetite iron ore project, a mothballed JV withHawthorn Resources (ASX:HAW).
Legacy’s major focus has been moving the small 184,100oz Mt Celia Gold project in the Eastern Goldfields into production.
Still, with iron ore prices hitting record highs, punters may be speculating that the company will dust off Mt Bevan,which has a pretty interesting history.
Macarthur MineralsThe project developer is aiming to complete a feasibility study on its big, high grade Lake Giles magnetite project in 2021.
MacArthur is currently looking to export though Esperance Port but “is actively working towards developing the lowest cost, end to end transport logistics solution that will sustain operations,” according to a first quarter update.
Surefire’s Perenjori magnetite project currently hosts a resource of 192 million tonnes at 36.6 per cent iron.
Metallurgical test work done during a previous scoping study demonstrated Perenjori could produce a high-grade and acceptably clean magnetite concentrate of up to 70%.
Surefire now plans to upgrade the current resource and follow up with a feasibility study.
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