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Flinders moves ahead with $5bn project as iron ore runs hot
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China’s economy, a major driver of iron ore demand, has rebounded strongly since the COVID-19 crisis and ASX juniors are riding the wave.
Iron ore prices touched a fresh six-year high this week at $US129.90 ($178.80) per tonne on a 62 per cent iron basis, according to Metal Bulletin.
Iron ore company Flinders Mines (ASX:FMS) has now been given the green light for its flagship $5bn Pilbara iron ore project (PIOP) in a joint venture with New Zealand’s BBI Group.
Flinders Mines said it has met all conditions for its farm-in joint venture with New Zealand’s BBI Group which lies to the west of Fortescue Metals Group’s (ASX:FMG) Solomon iron ore mining hub.
“This is an important milestone for Flinders as there is now a pathway to bring PIOP iron ore to market and the first step of this for BBIG to advance the necessary feasibility studies,” independent non-executive chairman, Neil Warburton said.
“An exciting development in our journey for our shareholders really begins here,” he added.
FMS Pilbara joint venture partner is NZ’s Todd Corporation
BBI Group is majority owned by New Zealand’s Todd Corporation, and is developing a new export route for the Pilbara iron ore project through a revived Balla Balla port in WA.
The integrated port and rail system will enable independent iron ore producers to ship Pilbara iron ore product, said the company’s website.
Installed shipping capacity at Balla Balla port of 50 million tonnes per year has met with approvals from the WA and federal governments.
The joint venture farm-in transaction received Foreign Investment Review Board approval in August.
Ore will be delivered to the port via a 160 km purpose-built railway, said BBI Group.
BBI Group has farm-in option to increase stake in JV
The joint venture’s board for the PIOP will have three Flinders’ appointees and one director appointed by BBIG.
Feasibility studies for the project can now advance with the completion of the farm-in agreement which is for an initial 10 per cent voting interest in the joint venture.
Flinders retains 100 per cent economic ownership of the PIOP until a final investment decision by BBI Group, and when this happens Flinders has two options.
Either it can decide to opt for a 40 per cent interest in the project, and BBI Group will fund the construction of an iron ore mine in return for a 60 per cent interest.
Alternatively, Flinders can convert its 100 per cent interest into on ongoing 2.5 per cent gross revenue royalty over the project’s life span.
Share prices of ASX iron ore companies FMS, FMG and GWR
FMG port expansion increases ore shipments by 35 million tonnes
Meanwhile, Fortescue Metals Group has received approval to increase shipments from its Herb Elliott port in the Pilbara to 210 million tonnes per year, from 175 million pa currently.
The increased shipments level will comprise 188 million tonnes per year of hematite ore, and 22 million tonnes per year of magnetite concentrate, said the company.
The magnetite shipments will be produced at FMG’s $2.6bn Iron Bridge Magnetite operation, with first ore on ship scheduled for mid-2022.
FMG will fully utilise its port infrastructure at Herb Elliott, comprising five ship berths and three ship-loaders.
Company guidance is for 175-180 million tonnes of iron ore shipments for the 2021 financial year.
