With 50 per cent increases in prices, Western Australia’s junior mining industry has gone iron ore crazy, with predictions of demand continuing to outstrip supply.
With 50 per cent increases in prices, Western Australia’s junior mining industry has gone iron ore crazy, with predictions of demand continuing to outstrip supply.
Already the larger players, such as Rio Tinto and BHP Billiton, have been pumping millions of dollars into their giant Pilbara mines to meet booming demand from North Asian steel makers for some time, but now the smaller players are catching on.
Unfortunately, analysts say fundraising may be an issue for some of the smaller companies, where it may not for a bigger company accustomed to developing iron ore projects, which typically involve larger scale operations.
Despite this, the numbers of new promoters are significant - even ignoring the likes of successful mid cap iron ore miner Portman Mining as well as high profile hopefuls in Andrew Forrest’s Fortescue Metals Group and Gina Rhinehart’s Hope Downs project. In the past month or so, at least five lesser-known mining companies have been touting fresh spins on WA iron ore projects. In total, WA Business News counted at least 10 iron ore-focused companies looking to develop projects in WA.
Some of the latest names include Grange Resources and Polaris Metals. Even gold and nickel explorers are getting in on the action; AusQuest and Atlas Gold.
Grange is conducting a $13 million bankable feasibility study on its Southdown magnetite iron ore project near Albany.
The company also hopes to develop a pellet-producing operation in Malaysia capable of producing 6.8 million tonnes per annum. The total cost of the operation is expected to be $800 million.
Polaris is considering whether a 2.5 mtpa magnetite operation is viable at its Bullfinch North magnetite project near Portman’s operations at Kolyanobbing.
Nickel and gold-focused AusQuest says it has found evidence of iron ore at its Bellary project in the Pilbara, while Atlas Gold recently announced it was targeting a 10mt hematite reserve at its Pardoo project in the Kimberley.
Other more known iron ore-focused companies have also been recently parading their projects.
Aztec Resources says it is close to finalising a bankable feasibility study on its 2 to 3mtpa hematite iron ore project on Kollan Island, while Gindalbie Metals has recently completed a scoping study on its Mt Karara iron ore deposit in the Mid West.
Gindalbie said the project could support a 20-year, 4mtpa operation worth $700 million, including a $350 million pellet plant.
Hartley’s resource analyst Jonathon Battershill said Chinese demand was driving the junior’s interest.
“Clearly there is a deficit on the way if the numbers coming out of China are correct,” Mr Battershill said.
However, he remained cynical about many of the smaller companies’ projects, saying some had very large capital start up costs while others were quite old.
“You know you are at the top of the cycle when Southdown is dusted off . . . but I am prepared to revisit it in 12 months,” said Mr Battershill, who believes an important factor to a smaller project is its location to existing infrastructure.
“Unless you are located near existing infrastructure you are looking at five to six years to build infrastructure.”
Patersons Securities resource analyst Alex Passmore said the smaller explorers were mainly looking at lower grade magnetite ore - generally used to make pellets.
He said pellet prices were expected to receive increases similar to that of direct shipping iron ore.
However, he also said due to the significant capital cost of pellet plants, fundraising could be an issue for some juniors.
• The writer has a beneficial interest in Aztec Resources.
