As the iron ore majors ramp up production, Fortescue Metals Group has an ace up its sleeve.
As miners deal with the reality of a prolonged slump in the iron ore price, Fortescue Metals Group is quietly going about the business of building the state’s third magnetite mine and processing plant.
It’s the first stage of FMG’s plan to change the way the lower grade iron ore can be developed in Australia.
Magnetite contains less iron than hematite, which Rio Tinto, BHP Billiton, FMG and a number of junior miners ship directly overseas.
However, it is highly valued and attracts a price premium in China because it can be transformed into a concentrate with higher iron content and lower greenhouse gas emissions than hematite when used in steel mills.
There are several proposed magnetite mines in Western Australia, but only Citic Pacific’s $10 billion Sino Iron project in the Pilbara and the much smaller joint venture Karara project in the Mid West between AnSteel and Gindalbie Metals are in production. While there are many other mines proposed, none are close to development.
Sino Iron has come under scrutiny for cost and timeframe blowouts, while Gindalbie recently wrote-down the carrying value of its 48 per cent share in project (by $585.6 million to zero) due to lower-than-expected production levels, the lower iron ore price and the exchange rate.
FMG chief executive Nev Power told Business News the company was constructing its North Star magnetite mine near existing infrastructure in the Pilbara because it was a world-class resource.
“It’s over four billion tonnes of high-grade magnetite, and what we’re doing there in stage one is a development to trial some new technology and some new ways of processing to see if we can change the way magnetite is developed in Australia,” Mr Power said.
“(It’s) the first time we’ve ever developed a magnetite mine and processed it.”
The mine is part of FMG’s Iron Bridge joint venture and is being developed in conjunction with Taiwan’s Formosa Group and China’s Baosteel Group.
Onyx Projects has been carrying out the engineering and design of the process plant.
While initial environmental approvals suggested the project would process 15 million tonnes of concentrate, the current infrastructure being set up is thought to be for a fraction of that.
It is believed FMG is also buying up magnetite rich tenements around the Yilgarn in the Goldfields, and has already begun negotiations with local Aboriginals before drilling.
Despite low iron ore prices putting pressure on higher-cost juniors, Radar Iron is pursuing a modest 250,000 tonnes of concentrate per annum by 2016 from its Yerecoin deposit close to rail and power infrastructure 150 kilometres north of Perth.
Led by former Polaris Metals executive director Jonathan Lea, Radar bought the project from Cliffs Natural Resources for less than $4 million in April, significantly less than the $18 million price Cliffs bought it from Atlas Iron in 2011.
Mid West playerTop Iron is nearing production on its flagship Mummaloo maghemite project, for which Alliance Contracting has the mining contract.
Maghemite is a third category of iron ore, with the chemical composition of hematite and the crystal structure of magnetite. Unlike magnetite it requires minimal beneficiation.
Top Iron plans to initially produce 1.5mtpa of maghemite and is targeting first shipment from Geraldton port to off-take partner Shanxi Jianbang Group by the end of this year.
