With iron ore prices hovering around US$120 per tonne (A$178) Venture Minerals is seriously considering restarting its Riley iron ore mine in Tasmania which has been on care and maintenance since September 2021. At the time of its closure, the price of iron ore was in free-fall plunging to US$80 per tonne (A$118) in late 2021.
Under the mine’s revival strategy, the company is investigating quick and cost-effective opportunities to reduce ongoing risks related to the volatility of the iron ore price.
Such strategies include employing its own staff to operate dry-hire mobile plant for dry screen benefication, limiting expensive contractual arrangements. The company plans on churning out five initial shipments of ore at low costs.
Venture is also in discussions with Prosperity Steel (PSU) regarding its offtake agreement which is set to expire in September this year. The company is angling to move to a fixed pricing mechanism from the current floating price with shipping to be transferred from a Cost and Freight (CFR) basis to a Free on Board (FOB)deal.
Under a CFR agreement, Venture assumes the greater responsibility for arranging and paying for the transportation of ore from port to port. A FOB deal moves this cost onto PSU once the ore is loaded onto the ship, drastically reducing working capital requirements.
Since placing its Riley mine on care and maintenance, Venture’s storage facility at Burnie has been leased to a third party providing a short-term cost saving. The current lease ends in June allowing the company to take timely possession of the facility upon restarting the mine.
Venture believes implementing several key austerity measures will lead to a quick restart and reduce both risk and working capital requirements.
The company’s Riley deposit takes in 1.6 million tonnes going 57 per cent iron from surface. It is located in northwest Tasmania, only 10km from Venture’s Mount Lindsay tin-tungsten deposit that contains over 80,000 tonnes of tin.
Production at Riley was scheduled at 800,000 tonnes per annum for two years with a low impurity haematite product grading 57 per cent iron. It commenced production with a shipment of 45,632 tonnes of iron ore with an average grade of 57.3 per cent iron before deteriorating market conditions lead to suspension of operations.
Goldman Sachs recently upgraded its iron or price forecast by 20 per cent to US$120 a tonne from US$100 a tonne in 2023. With an expected 43 million tonne deficit of iron ore in the market spurred on by China’s faster than expected economic reopening, the global investment bank has also issued a three-month target of US$150 a tonne compared to the spot price of US$125 a tonne.
If Venture can pull through with its quick start strategy at its Riley iron mine, the company looks set to reap the rewards of a strengthening iron ore price amidst a short-term supply squeeze.
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By Helen Barling
