• Emissions from Australia’s iron ore miners are coming back into focus
  • Guinea’s giant Simandou iron ore mine is back on, but analysts say the official timeframe is ambitious
  • European countries could replace gas with coal amid Russian sanctions

Emissions from the iron ore majors have been placed back under the microscope after gold boss Alberto Calderon flagged the looming issue for BHP (ASX:BHP) and Rio Tinto (ASX:RIO) in a speech at the Melbourne Mining Club last week.

The whole deal was in a way self-serving on Calderon’s part. The boss of South African gold giant AngloGold Ashanti (ASX:AGG), the fourth largest after Barrick and Newmont Goldcorp, was keen to spread the message that gold – regardless of what Bill Beament may have said last year – is green.

He argued analysis from the World Gold Council showed investors could cut the emissions intensity of their portfolios by ditching other investments like Bitcoin for gold.

Or as Kanye West says on College Dropout deep cut Two Words: “F. You, Pay Me.”

Calderon’s talk, heavily reported on by the mining media and the well-heeled types who attend Melbourne Mining Club luncheons, did bring renewed attention to the extraordinary Scope 3 emissions generated by steelmakers processing iron ore from the Pilbara majors relative to other miners.

Those are extraordinary. All up steel factories generate 7-8% of all CO2 emissions.

BHP for instance was indirectly responsible for 402.5Mt of Scope 3 emissions in FY2021, 260Mt of which came from the processing of iron ore into crude steel and 39.8Mt from met coal processing.

 

Snowball effect

Iron ore market expert Mark Eames says the need to reduce emissions in the global steel and iron ore industry “is just going to be a snowballing story”.

“I think we’ll start to see more and more commentators come out and actually talk about what that means for the big mining companies and in particular for Australia, because if you like, the significant carbon footprint of iron ore products is really just starting to be understood and become widely commented on,” he said.

“And on the other side of the same equation what are people doing about it? It’s interesting that BMW invested in a US clean steel startup Boston Metal, Mercedes Benz bought a stake in a Swedish startup H2 Green Steel.

“So we’re starting to see carmakers putting pressure on their suppliers, steel producers.

“So for example, under pressure from carmakers, the Swedish steel producer SSAB has brought forward its plans to eliminate carbon from its operations by 2030.

“So what we’re seeing I think is a steadily increasing understanding of the contribution iron ore and steel making using coke based or coal-based methods makes to the greenhouse footprint.”

 

Whither the high grade ore

Many commentators think that thematic will drive a flight to higher grade iron ores.

Higher grade iron ore feed reduces emissions in the blast furnace process by cutting the amount of coal required to reduce the iron ore to crude steel.

But it is also the ideal form of iron ore for lower emissions technologies like direct reduced iron, a process which currently uses gas and in theory could be retrofitted to run off “green hydrogen” in the future.

DRI relies on high grade pellets designed for the process because a slag is not produced, meaning the impurities that enter the mill are the ones that exit.

However, with Australian iron ore fines at US$151.90/t according to steel consultancy MySteel, high prices are incentivising production of lower than benchmark grades right now.

With a lot of low grade product on the market, discounts have been significant for 58% ore, but the benchmark price has been high enough to support very healthy margins.

While majors like Rio, BHP and FMG (ASX:FMG) are trying to lift their average grades by investing in higher grade ore sources, some companies like Mineral Resources (ASX:MIN) are still looking to bring bulk, low grade tonnes onto the market.

“Essentially there’s a lot more low grade coming on and the average grade in Australia is declining,” Eames said.

“There are some small shifts so BHP is replacing its Yandicoogina mine with South Flank that actually does improve the average grade at BHP, but Rio’s struggling. Fortescue is obviously developing Eliwana and Iron Bridge, they’re really relatively small.

“The overwhelming trend over the past 30 years is grades out of Australia have been declining. And that’s because the resources are getting harder and harder to extract. That’s the really simple version, and that it really requires a shift away from the Pilbara type ore bodies.”

At the junior end of the market iron ore explorers have been firming up higher grade magnetite operations previously viewed as too expensive or difficult as market conditions shift.

Eames is the technical director of Magnetite Mines (ASX:MGT), which owns the proposed Razorback mine in South Australia’s Braemar region.

The company is completing a DFS currently, with plans to open the mine at 3Mtpa in 2024 and expand incrementally to 7Mtpa as demand for high grade iron ore rises in the decade ahead according to an expansion study released last week.

It was one of three to reveal high grade expansion plans last week, along with Macarthur Minerals (ASX:MIO) and Grange Resources (ASX:GRR), already the operator of the Savage River magnetite mine in Tasmania, which wants to develop the $1.4 billion Southdown project near Albany in WA.

 

Simandou you want me baby?

One potential source of high grade iron ore is the proposed Simandou mine in Guinea, which depending on who you believe could deliver between 60Mt and 150Mt of 65% iron ore fines a year similar in specs to Brazilian miner Vale’s premium Carajas product.

The mine has been branded the ‘Pilbara killer’ due to the theory China could use its ore to wean itself off Australian product, hitting prices for Pilbara fines.

It has been a tumultuous couple of weeks for the development, after the Guinean Government underlined the fraught nature of iron ore developments on the African continent by ordering Rio Tinto, Chinalco and the Chinese-backed SMB Winning Consortium to down tools around a fortnight ago.

That gave way to a new three cornered framework over the weekend that will see work resume with Guinea’s military junta collecting a much larger slice of what it says is a US$15 billion development.

The “framework”, confirmed by Rio executive Bold Baatar, has set ambitious delivery timeframes for a project requiring 670km of railway and a new deepwater port. Guinea’s mines minister Moussa Magassouba wants to see commercial production by March 2025.

Analysts from Morgan Stanley are cynical, predicting first ore in 2028.

“While the government is pushing for first ore 2025, it is unlikely the project will ramp fast,” they said in a note to clients.

Eames, whose career included a stint trying to develop iron ore mines in Africa as an executive at Glencore, said the ramp up of Simandou would be easier said than done.

“In short, without specifically looking at commenting on SMB Winning in particular, what I would say is that any development of the scale of Simandou is going to require very large infrastructure development — roads, rails, towns, power stations, ports,” he said.

“It would be almost inconceivable to me that you could get all that work done in what essentially is two and half years.

“If you’ve really got 23-24 and the balance of this year, if you’re going to get into production in 2025, it’d actually be quite a feat to deliver, just to build that if all the money was lined up, and everything was ready to go.”

BHP’s South Flank for instance, engineered by the world’s largest iron ore miner, took almost a decade from its study phase and is co-located with existing mines close to the world’s largest iron ore export hub at Port Hedland.

South Flank produced first ore around three years after construction began in July 2018, but has a three-year journey to ramp up to its full 80Mtpa run rate.

“I would say a development timeframe in the five- to 10-year range for a large scale iron ore project is more realistic,” Eames said.

“Our last development in Australia was Roy Hill. And that also took a fair time and arguably in an area that’s already got a strong industrial base and existing operations and everything else.

“So the short answer I think is these very aggressive timeframes for these large infrastructure projects are very hard to deliver in practice.”

 

ASX iron ore stocks

Scroll or swipe to reveal table. Click headings to sort.

CODE COMPANY PRICE 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % MARKET CAP
ACS Accent Resources NL 0.054 0% -4% -2% -40% $ 25,165,473.28
ADY Admiralty Resources. 0.016 -11% 0% 0% -27% $ 23,464,424.75
AKO Akora Resources 0.38 12% 21% 81% 0% $ 18,749,006.21
BCK Brockman Mining Ltd 0.042 -7% -9% -13% 24% $ 389,727,749.50
BHP BHP Group Limited 50.62 9% 8% 37% 12% $ 257,773,496,834.80
CIA Champion Iron Ltd 7.39 4% 15% 51% 41% $ 3,828,094,001.16
CZR CZR Resources Ltd 0.008 14% 7% 0% -27% $ 27,890,586.22
DRE Dreadnought Resources Ltd 0.038 -5% 0% 3% 90% $ 113,547,342.04
EFE Eastern Resources 0.049 -2% -4% 14% 377% $ 48,495,716.79
CUF Cufe Ltd 0.034 0% 3% -35% -17% $ 33,113,932.78
FEX Fenix Resources Ltd 0.265 8% 18% 15% 13% $ 134,215,619.20
FMG Fortescue Metals Grp 19.49 4% 7% 31% -3% $ 59,793,498,707.56
FMS Flinders Mines Ltd 0.515 3% 5% -37% -58% $ 87,801,260.04
GEN Genmin 0.19 9% -5% 12% -28% $ 53,634,691.50
GRR Grange Resources. 1.07 1% 10% 152% 155% $ 1,244,139,100.35
GWR GWR Group Ltd 0.155 2% 7% 11% -39% $ 49,788,581.53
HAV Havilah Resources 0.18 6% 6% -3% -18% $ 58,863,283.83
HAW Hawthorn Resources 0.073 -5% -19% 46% 18% $ 24,346,639.75
HIO Hawsons Iron Ltd 0.265 39% 66% 223% 629% $ 139,435,325.25
IRD Iron Road Ltd 0.185 -3% 3% 3% -21% $ 147,393,234.41
JNO Juno 0.1 1% 11% -31% 0% $ 13,565,800.10
LCY Legacy Iron Ore 0.02 5% 5% 54% 29% $ 128,136,523.98
MAG Magmatic Resrce Ltd 0.082 -15% -22% -8% -32% $ 20,613,430.64
MDX Mindax Limited 0.059 0% 0% 18% 1867% $ 112,672,163.12
MGT Magnetite Mines 0.033 0% 10% 27% -34% $ 104,271,647.07
MGU Magnum Mining & Exp 0.07 -8% 8% 8% -30% $ 36,786,891.54
MGX Mount Gibson Iron 0.64 20% 22% 33% -16% $ 768,710,700.96
MIN Mineral Resources. 49.99 7% 10% 9% 35% $ 9,293,318,883.31
MIO Macarthur Minerals 0.545 14% 65% 18% 5% $ 79,435,650.96
PFE Panteraminerals 0.165 -6% 0% -49% 0% $ 8,332,500.00
PLG Pearlgullironlimited 0.066 -16% -6% -64% 0% $ 3,952,966.18
RHI Red Hill Iron 3.5 -2% -7% 15% 1193% $ 220,845,395.54
RIO Rio Tinto Limited 116.84 6% -1% 20% 6% $ 43,977,984,872.58
RLC Reedy Lagoon Corp. 0.03 11% 25% 3% 30% $ 16,450,716.90
SHH Shree Minerals Ltd 0.016 -16% 7% 60% 7% $ 17,011,790.27
SRK Strike Resources 0.13 8% 8% 4% -35% $ 36,450,000.00
SRN Surefire Rescs NL 0.0125 -4% -4% -4% -55% $ 14,665,532.82
TI1 Tombador Iron 0.041 0% 21% 8% -43% $ 44,718,013.52
TLM Talisman Mining 0.185 3% 9% 16% 61% $ 33,793,109.46
VMS Venture Minerals 0.046 18% 24% -13% -19% $ 70,138,218.86
EQN Equinoxresources 0.185 -3% 0% 0% 0% $ 7,875,000.18

 

CZR targeting 3Mtpa at Robe Mesa

Under the radar Australian junior CZR Resources (ASX:CZR) is looking to unlock its own Pilbara payday with the Robe Mesa DSO mine immediately north Rio Tinto’s Mesa F deposit.

The company is looking to ramp up its proposed production rate from 2Mtpa of hematite DSO to 3Mtpa in an upcoming DFS after a host of new drilling results identified mineralisation outside its PFS mine plan.

A new resource is due in the June quarter, with diamond and extensional RC drilling also planned.

The significant intercepts at Robe Mesa measure an average of 55.6% iron (62.3% calcined) at a 53% cutoff grade, with all the DSO sitting above the water table.

That puts it in similar iron ore marketing category to Rio’s Robe Valley Fines, Fortescue’s Super Special Fines and Atlas Iron’s Atlas Fines products.

“As well as expanding the DSO mineralisation, we are undertaking essential work on land access, environmental studies, community relationships and logistics, including port access,” CZR MD Stefan Murphy said.

“With a dedicated Study Manager (Fabian Goddard) now leading the DFS, we are moving ahead rapidly with our plan to complete the DFS and bring Robe Mesa into production.”

Rio’s Robe Valley Fines are generally lower in grade than its primary Pilbara Blend but have a low phosphorous content, making it sought after for specialty steel producers with niche products.

 

CZR Resources (ASX:CZR) share price today:

 

 

Europe becoming more reliant on coal as Russian war unfolds

Russia’s war with Ukraine has sent coal prices spiralling out of control as customers close their doors to Putin’s fuel.

But it has improved demand for coal in another way, with S&P Global reporting the shift away from Russian gas supplies will lead to higher coal demand out of Europe.

“The only commodity that can help solve the energy crisis in Europe in the short term is coal,” deputy CEO Sveinung Stohle of Greek shipper Angelicoussis Group said in a panel at the FT Commodities Global Summit last week.

“Like it or not, coal will play a very important role.”

That’s a struggle in today’s world, given coal supplies are so tight most producers are fully booked. The Feds made a big song and dance about a 70,000t shipment of coal they secured for Ukraine from Whitehaven (ASX:WHC), worth around $31.7m at last week’s market prices.

But that’s only a few days supply, with Europe needing a far larger redirection of trade flows to complete a fast transition from Russian coal, oil and gas.

Thermal coal prices have come down from the astonishing levels of more than US$440/t they hit in the immediate aftermath of the Russian invasion of Ukraine, but remain high with Newcastle futures trading at US$258/t.

 

ASX coal stocks

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CODE COMPANY Last %Wk %Mth %SixMth %Yr MktCap
NAE New Age Exploration 0.012 0% -14% -4% -11% $ 18,666,685.83
CKA Cokal Ltd 0.185 9% 19% 19% 176% $ 169,010,816.40
NCZ New Century Resource 1.86 -5% 1% -20% -23% $ 258,706,658.18
BCB Bowen Coal Limited 0.265 2% 20% 61% 311% $ 402,859,612.28
LNY Laneway Res Ltd 0.006 9% 4% 39% 39% $ 33,614,711.54
GRX Greenx Metals Ltd 0.195 0% 8% -32% -6% $ 49,455,990.48
AKM Aspire Mining Ltd 0.083 -12% 4% 0% -14% $ 48,225,513.58
PAK Pacific American Hld 0.016 7% 0% 0% -25% $ 7,646,038.43
AHQ Allegiance Coal Ltd 0.48 -4% -1% -16% 19% $ 194,910,070.00
YAL Yancoal Aust Ltd 4.63 5% 33% 74% 103% $ 6,272,087,325.75
NHC New Hope Corporation 3.4 16% 34% 38% 150% $ 2,913,249,787.00
TIG Tigers Realm Coal 0.017 42% 42% 0% 127% $ 196,000,535.52
SMR Stanmore Resources 1.85 11% 73% 122% 166% $ 1,586,950,969.26
WHC Whitehaven Coal 4.25 6% 32% 30% 143% $ 4,584,940,390.08
BRL Bathurst Res Ltd. 1.03 7% 31% 15% 151% $ 172,661,139.23
CRN Coronado Global Res 2.08 9% 28% 52% 124% $ 3,587,610,982.20
JAL Jameson Resources 0.08 -6% 18% 0% -38% $ 27,856,264.96
TER Terracom Ltd 0.455 -3% 44% 168% 429% $ 357,963,624.25
ATU Atrum Coal Ltd 0.014 0% -33% -68% -80% $ 8,987,788.37
MCM Mc Mining Ltd 0.1 -9% 18% -20% -9% $ 16,986,151.05

 

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