AN increase in iron ore prices of 71.5 per cent this year has added a massive incentive to second-tier iron ore producers/explorers in Western Australia, particularly those in the Mid-West.
An increase in iron ore prices of 71.5 per cent this year has added a massive incentive to second-tier iron ore producers/explorers in Western Australia, particularly those in the Mid-West.
Portman, Mt Gibson Iron, Midwest Corp, Murchison Metals and Gindalbie Metals are all in rapid expansion mode, with Midwest expected to ship its first ore before the end of the year and Murchison in February-March next year.
The last four currently, or will, export via Geraldton Port, while Portman uses Esperance.
But there are several obstacles for these new players, not the least of which is competition from heavyweights BHP Billiton and Rio Tinto, rising costs and a backlog in the WA approvals system.
These hopefuls, however, remain unphazed.
Mt Gibson Iron finished its first full year of operations with a $23.6 million net profit and some bold expansion plans.
These include lifting production from its original Tallering Peak mine, 170 kilometres north-east of Geraldton, from two million tonnes a year (mtpa) hematite to 3mtpa by January next year and maintaining that rate through to at least the end of 2011.
The company has also given the green light to a $550 million hematite mining project at Extension Hill, 330km south-east of Geraldton, to start in early 2007 at an initial 1.5mtpa and rising to 4.5mtpa within 18 months.
Mt Gibson also has a 63 per cent stake in Asia Iron Holdings, a Hong Kong registered company which is developing Extension Hill in a 50/50 joint venture with the Chinese steelmaking Shougang Group.
Asia Iron will separately build and own a 2.5mtpa pellet plant in China, scheduled to come on stream in early 2007. Mt Gibson intends to increase its shareholding in Asia Iron to 80 per cent by the end of this year.
The company intends to establish sufficient resources in the Mid-West region to maintain sales of 4.5mtpa of hematite for at least 10 years from 2007.
Midwest Corp, formerly Kingstream, has scheduled the first iron ore shipment from its Koolanooka/Blue Hills project, 160km east of Geraldton, for December this year.
The $14.5 million, 1mtpa export production over seven years will come from stockpiles from the previous operation of 4.8mt at 56.2 per cent iron and similar sized reserves.
Hard rock mining at Koolanooka is planned for mid-2007 and at nearby Blue Hills, with resources of 4.3mt at 59.8 per cent iron, in 2008.
Midwest also has an agreement with major Chinese iron ore importer, SinoSteel Corp, for the joint development of the company’s two major proposed projects, the Weld Range Hematite and Koolanooka magnetite projects.
Weld Range, 65km south-west of Meekatharra, has resources of 132 million tonnes and the potential for between 400mt and 500mt at up to 65 per cent iron. Project start up for the $800 million, 15-20mtpa project was originally planned for 2010, but this may change depending on the framework agreement being successfully completed by the end of this month and pre-feasibility by the middle of next year.
The $750 million Koolanooka project has a resource of 430mt at 35 per cent iron, with planned production of 4.5mtpa concentrate /iron over 30 years from 2011.
Recently listed Murchison Metals is planning production from the $24 million first stage of its Jack Hills project, 350km north-east of Geraldton, in December this year with the first ore being shipped in the first quarter 2006.
Stage one annual production will begin at 1.2mt in 2006, rising to 1.8mt in 2007 and 2mt by 2009. Fixed sales contracts have been entered for just over half of 2006 production.
New reserves estimates are expected next month that will hopefully result in 9mt of reserves being delineated from the current inferred/measured resource of 67mt.
The $950 million stage two development calls for an operation of up to 25mtpa over 20 years.
Gindalbie Metals has begun pre-feasibility studies for the development of a magnetite mine at its Mt Karara deposit within its larger $720 million Blue Hills project, 220km east-south-east of Geraldton.
The company is drilling to define resources to support a 4mtpa pellet project for at least 20 years, with commissioning/shipping beginning in 2009. It also plans to develop a 1mtpa operation at Mungada, also in the Blue Hills, beginning late next year, early 2007.
Sitting just outside the Mid-West region is Portman, which has established a niche market supplying 75 per cent of its product to China, the rest to Japan, and has a word of caution for the newcomers.
Managing director Richard Mehan said world steel prices had softened over the past six months, prompting a slowdown in demand for iron ore from China.
“The Chinese government has tried to take some heat out of the spot iron ore market by restricting the ability for small steel mills to import. There has also been some drawdown of iron ore inventories by steel producers,” he said.
“However, we don’t see that softness as necessarily being sustained. Our expectation is that China will move back to a growth story pretty soon.”
Portman is expected to produce an increased 5.7mt from its Koolyanobbing operation, north of Southern Cross, this year and lift production by 2mtpa to 8mtpa there by year’s end.
The company will also ship about 1.2mtpa from its 50 per cent owned Cockatoo Island project, off the coast just north of Derby.
So far, Portman has spent about $30 million on its current $60 million expansion, which includes new facilities at its Esperance storage and plant facilities.
Koolyanobbing has a mine life of 11.5 years, based on 91.8mt of reserves.
Up north, Aztec Resources expects to ship the first ore direct from its $108 million Koolan Island project, 130km north-west of Derby, in the second half of next year.
Despite being hit around by rising costs, a bankable feasibility, indicates the proposed 4mtpa mine should generate operating profits of $583 million from sales of 1.4 billion tonnes in its first nine years.
Aztec chairman Ian Burston is confident the mine life can be extended to at least 15 years, given current resources of 47mt at 68 per cent iron and the potential for more.
The company already has agreements for 3.4mtpa with three Chinese and three Japanese buyers. Finance, via a mix of debt and equity, government and environmental approvals are all expected to be in place before the end of the year.
Resource Mining Corp expects to ship its first iron ore out of Wyndham, at the top of WA, in early 2007, following production from its nearby Argyle mine at the end of next year.
The feasibility study on the $50 million project is scheduled for completion before the end of this year, based on hematite production of 1.5mtpa to 2mtpa.
On the acquisition trail, junior International Goldfields is buying the 2.5 billion tonnes (30 per cent iron) Cape Lambert iron ore project in the Pilbara between Karratha, Roebourne and Wickham.
According to IGL executive chairman Tony Sage, the deal is via the acquisition of Mt Anketell Pty Ltd for $20 million, plus 140 million IGL options, to be funded out of an upcoming $33 million placement.
IGL expects a bankable feasibility study on the project, previously owned by Rio Tinto unit Robe River Mining, will take 12 to 18 months.
Down south, Grange Resources is looking to begin construction of its $560 million million Southdown magnetite project, 90km north-east of Albany, in the second half of next year to enable the first shipment of concentrate in December 2008.
The company plans to produce 6.5mtpa of concentrates, grading 69 per cent iron, to be transported via slurry pipeline to the Port of Albany.
It is a big undertaking for a project that has been around for a while and Grange managing director Geoff Wedlock acknowledges that funding is likely to involve new equity partners, with Grange retaining an interest around 33 per cent.
Southdown currently has inferred resources of 279mt grading 37 per cent magnetite, but the $14 million feasibility expected to be completed by December, will hopefully lift that to 400mt.
And what would a new iron ore producers story be without Fortescue Metals’ $2.3 billion-plus, 45mtpa Pilbara project, which is scheduled to ship its first Chichester Range ore out of Port Hedland in late 2007.
One of the major problems here is the Chinese commitment, or lack of it, to project financing.
Fortescue has been in continuing discussions with international steel companies recently, including the big SinoSteel Corp.
While none of the Fortescue discussions has reached a conclusive stage, Fortescue operations director Graeme Rowley says financial close on the project will occur within the next six months or so.
