Pic: Getty
Bulk Buys: This Chinese iron ore miner says demand for its high grade iron ore is set to boom
Mining
share
We all know the steel industry has a big job ahead of it to ‘go green’, one many sceptical observers view as a nigh on impossible task.
Steel production is responsible for between 7-8% of global CO2 emissions, but is a major Catch 22.
Without it building the renewables to decarbonise any number of industries, including mining, is impossible.
Miners like BHP (ASX:BHP) actually see iron ore demand rising in a decarbonising world despite the obvious concerns around the steel production process.
China, where almost 60% of the world’s steel is generated, contains a blast furnace fleet in relative infancy compared to smelters in Europe and the USA, where steelmakers are trying to shift quicker to direct reduced iron steelmaking.
That means the Pilbara’s 62% Fe lump and fines iron ore will be needed for decades to come, as will metallurgical coal.
There are other potential concerns around making steel mill feed from lower grade 62% Fe iron ore, like that generated from hematite mines in the Pilbara.
Beneficiation methods thus far have proven disappointing, though low emissions steel from those sources, the easiest to mine and most abundant in the world, are ongoing with techniques being studied by major steel companies in partnership with BHP, Rio Tinto (ASX:RIO) and Fortescue Metals Group (ASX:FMG).
Until then, the main source of iron ore for ‘green steel’ will come from high grade magnetite concentrate.
Grading upwards of 67% Fe, as of the present moment only 125Mt of the roughly 1.5Bt of iron ore traded globally meets these spex.
WoodMac estimates that will need to lift five-fold. Given how little of it exists and how expensive it is produce that could be a very tall order indeed.
The Chinese iron ore miner in our backyard
Fortescue Metals Group has already responded to this shift in the iron ore market with the development of the US$3.9 billion Iron Bridge magnetite mine, which will produce 22Mtpa of 67% Fe plus iron ore once fully operational.
Champion Iron (ASX:CIA) and Grange Resources (ASX:GRR) already offer opportunities for Australian investors to play this narrative as pure play high grade iron ore producers, with explorers like Magnetite Mines (ASX:MGT) and Hawsons Iron (ASX:HIO) offering much earlier stage options.
But early movers on the large scale projects really needed to feed into the green steel narrative have already been operating in WA’s Pilbara and Mid West for a long time.
That includes the 21Mtpa Sino Iron operation run by Citic Pacific Mining.
The site is best known for its years of struggling with ramp up and a long-running dispute over royalties from the Cape Preston mine and former politician Clive Palmer, whose stoush with Citic has turned into a cycle of litigation against the WA Government.
But Citic is now espousing the value of the asset in the fight against climate change, saying that despite its higher upstream emissions in WA from the enormous power draw of its processing plant, it results in a 10% saving on overall emissions once its concentrate is refined in China.
The company said this week research produced last year by former BHP researchers Dr Joe Herbertson and Dr Les Strezov for The Crucible Group shows the Cape Preston product generate 180kg less CO2 for each tonne of steel produced overseas compared to 62% hematite ore from the Pilbara.
CPM’s chairman and CEO Chen Zeng said the project could be a catalyst for the development of renewable energy in the Pilbara.
“The report affirms previous findings which shows our investment in iron ore value-adding here in Australia is making a positive contribution towards lowering emissions in steelmaking,” he said.
“Given the significant energy requirements for beneficiation, we see great potential to be a catalyst for the development of emerging renewable energy projects in the area and establishing the Pilbara as one of the world’s leading green energy hubs.”
“In the meantime, our product is delivering an immediate emissions benefit when used as an iron-making feedstock.”
Expansion of magnetite industry needed
Herbertson and Strezov say in the report that iron ore producers “will need to prepare for a changing industry structure, where EAF steelmaking grows substantially, matching the integrated sector by mid-century.”
“A commonly envisaged pathway to Net Zero is the manufacture of ‘green’ hydrogen direct reduced iron (DRI /HBI) for use in EAF plants. This requires high quality iron ore feed (> 67% Fe), since the EAFs have a lower tolerance for impurities that may arise from gangue.
“More generally from a climate perspective, the most important contribution from miners in a decarbonising world will be supply of higher quality ore.
“The magnetite industry is well placed to meet this challenge, since it already beneficiates by grinding and magnetic separation as a standard practice, given that primary (in ground) magnetite resources are typically lower grade resources,” they added.
“It is noteworthy that virtually all projects currently under development globally to produce stringent DRI-grade ore standards are based on beneficiated magnetite.
“Decarbonisation and EAF growth will combine as complementary drivers for substantial expansion of the magnetite industry, globally and in Australia.”
62% Fe iron ore prices in Singapore lifted over 3% to US$112.55/t yesterday amid hopes of a big recovery in China’s economy on the back of some very bullish comments from Chinese Premier Li Qiang.
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 | 0.011 | 0% | 10% | -56% | -82% | $ 5,204,400.11 |
| ADY | Admiralty Resources. | 0.006 | -25% | 0% | 0% | -40% | $ 10,428,633.22 |
| AKO | Akora Resources | 0.17 | -3% | -8% | 0% | -8% | $ 14,722,336.17 |
| BCK | Brockman Mining Ltd | 0.032 | 7% | 0% | 39% | -6% | $ 296,967,428.19 |
| BHP | BHP Group Limited | 45.11 | -3% | 6% | -2% | 9% | $ 225,175,723,714.20 |
| CIA | Champion Iron Ltd | 6.12 | -4% | 1% | -17% | 14% | $ 3,108,330,687.26 |
| CZR | CZR Resources Ltd | 0.17 | 0% | 0% | -23% | -15% | $ 45,968,255.97 |
| DRE | Dreadnought Resources Ltd | 0.052 | -5% | -7% | -46% | 30% | $ 173,041,867.44 |
| EFE | Eastern Resources | 0.01 | -13% | 0% | -64% | -58% | $ 12,419,464.61 |
| CUF | Cufe Ltd | 0.013 | 18% | 8% | -7% | -32% | $ 13,525,573.11 |
| FEX | Fenix Resources Ltd | 0.25 | -2% | 6% | 6% | -17% | $ 146,040,480.00 |
| FMG | Fortescue Metals Grp | 21.95 | -2% | 12% | 7% | 23% | $ 65,705,111,350.12 |
| FMS | Flinders Mines Ltd | 0.45 | 7% | -2% | 18% | 25% | $ 70,916,402.34 |
| GEN | Genmin | 0.165 | 14% | 10% | -18% | 0% | $ 60,923,236.59 |
| GRR | Grange Resources. | 0.515 | -8% | -4% | -38% | -59% | $ 567,095,962.02 |
| GWR | GWR Group Ltd | 0.065 | -6% | -2% | 5% | -29% | $ 20,557,865.92 |
| HAV | Havilah Resources | 0.225 | -4% | -13% | -27% | -6% | $ 72,827,018.30 |
| HAW | Hawthorn Resources | 0.14 | 0% | 75% | 19% | 65% | $ 48,577,263.89 |
| HIO | Hawsons Iron Ltd | 0.036 | -16% | 3% | -57% | -93% | $ 35,843,771.30 |
| IRD | Iron Road Ltd | 0.079 | 0% | -6% | -41% | -46% | $ 63,744,426.29 |
| JNO | Juno | 0.082 | 9% | 14% | -12% | -32% | $ 11,123,956.08 |
| LCY | Legacy Iron Ore | 0.02 | 0% | 25% | 11% | 5% | $ 134,543,350.18 |
| MAG | Magmatic Resrce Ltd | 0.082 | 3% | -34% | -4% | 44% | $ 23,844,038.24 |
| MDX | Mindax Limited | 0.062 | 2% | -35% | 5% | 5% | $ 122,733,526.80 |
| MGT | Magnetite Mines | 0.4 | -2% | -11% | -37% | -62% | $ 30,714,474.65 |
| MGU | Magnum Mining & Exp | 0.021 | -13% | -25% | 5% | -43% | $ 16,541,688.02 |
| MGX | Mount Gibson Iron | 0.43 | -8% | 10% | -11% | -17% | $ 522,200,313.19 |
| MIN | Mineral Resources. | 70.78 | -4% | 1% | -11% | 45% | $ 13,500,846,306.48 |
| MIO | Macarthur Minerals | 0.185 | -8% | 12% | 37% | -10% | $ 32,341,430.16 |
| PFE | Panteraminerals | 0.1 | 25% | 39% | -13% | -17% | $ 4,841,105.28 |
| PLG | Pearlgullironlimited | 0.03 | 0% | 0% | -3% | -14% | $ 4,379,654.66 |
| RHI | Red Hill Minerals | 4.61 | 4% | -2% | 9% | 45% | $ 298,715,737.32 |
| RIO | Rio Tinto Limited | 114.64 | -2% | 6% | -1% | 10% | $ 41,850,915,966.36 |
| RLC | Reedy Lagoon Corp. | 0.006 | 20% | 0% | -40% | -65% | $ 2,833,598.01 |
| CTN | Catalina Resources | 0.003 | 0% | 0% | -67% | -57% | $ 3,715,460.68 |
| SRK | Strike Resources | 0.062 | 0% | -9% | -27% | -46% | $ 15,890,000.00 |
| SRN | Surefire Rescs NL | 0.013 | -7% | -26% | 8% | -38% | $ 23,119,088.68 |
| TI1 | Tombador Iron | 0.019 | 0% | -7% | -24% | -27% | $ 42,992,147.46 |
| TLM | Talisman Mining | 0.17 | -6% | -8% | 26% | 31% | $ 31,072,857.59 |
| VMS | Venture Minerals | 0.014 | -7% | -18% | -39% | -56% | $ 27,300,182.49 |
| EQN | Equinoxresources | 0.12 | -8% | -14% | -8% | -27% | $ 5,400,000.12 |
| AMD | Arrow Minerals | 0.003 | 0% | -25% | -25% | 0% | $ 9,071,295.29 |
Tigers Realm heads to court
Coal prices continue to hold little of the gloss they did last year, with low requirements in suddenly gas-rich Europe bringing Newcastle prices back to something resembling normality.
Front month 6000kcal futures are fetching US$139.50/t at the moment, while coking coal futures are drawing in the high US$220s.
Both are good, profitable prices still, though some miners are struggling with high costs, especially in Queensland where logistics problems abound and an aggressive royalty scheme continues to face criticism from companies like BHP.
That is nothing like the trouble facing Tigers Realm Coal (ASX:TIG).
Majority owned by Sirtex Medical founder Dr Bruce Gray, whose win over former employer UWA over the rights to keep his investment in the firm is the stuff of law school legend, the company is unique.
It mines coking coal in Siberia and sells it overseas, mainly to China.
That has placed the company in a bind with Australia’s sanction regime.
The company said it proactively engaged the Australian Sanctions Office within the Department of Foreign Affairs and Trade, receiving an opinion from DFAT that its non-binding indicative assessment was that its mining operations were likely to be prohibited or subject to authorisation under the Australian Sanctions Regulations.
It as invited to apply for an exemption permit, but has now filed a Federal Court application seeking a declaration that regulation 4A of the ASR does not apply to its mines.
“The Company has not applied for an exemption permit as it has determined it is not appropriate to do so where the Company does not consider its operations fall within the scope of regulation 4A,” the company said on Monday.
Potentially complicating matters, Tigers Realm’s top four shareholders is the Russian Direct Investment Fund. It has been looking into a privatisation process in recent months and expects to sell 1.1Mt of coal this year.
In its March quarter report in April TIG reported that it expected to see continued pressure to discount prices against international benchmarks with the displacement of Russian coal from Europe and countries like Japan seeing increased competition from Russian providers into China and India.
The legal application from TIG comes amid an escalation of Australian diplomatic tensions with Russia, which lost a legal bid this week to keep a plot of land adjacent to Parliament House resulting in the dramatic exit of a diplomat who had been squatting in a demountable on the site.
ASX coal 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 |
|---|---|---|---|---|---|---|---|
| NAE | New Age Exploration | 0.0055 | 10% | -21% | -31% | -8% | $ 7,179,494.55 |
| CKA | Cokal Ltd | 0.11 | -4% | -15% | -49% | -12% | $ 118,684,387.80 |
| BCB | Bowen Coal Limited | 0.145 | -9% | -34% | -52% | -42% | $ 318,009,357.47 |
| SVG | Savannah Goldfields | 0.11 | 0% | -27% | -39% | -31% | $ 20,564,085.99 |
| GRX | Greenx Metals Ltd | 1.115 | 11% | 45% | 87% | 519% | $ 301,133,743.88 |
| AKM | Aspire Mining Ltd | 0.068 | 10% | 19% | 1% | -17% | $ 34,519,314.98 |
| AVM | Advance Metals Ltd | 0.007 | 0% | -13% | -22% | -30% | $ 4,119,911.08 |
| AHQ | Allegiance Coal Ltd | 0.013 | 0% | 0% | -68% | -96% | $ 13,063,647.08 |
| YAL | Yancoal Aust Ltd | 4.4 | -3% | -11% | -30% | -15% | $ 5,836,342,311.54 |
| NHC | New Hope Corporation | 4.76 | -12% | -4% | -27% | 43% | $ 4,314,908,151.45 |
| TIG | Tigers Realm Coal | 0.005 | -17% | -38% | -69% | -71% | $ 65,333,511.84 |
| SMR | Stanmore Resources | 2.56 | -3% | -2% | -14% | 33% | $ 2,307,562,583.04 |
| WHC | Whitehaven Coal | 6.57 | -3% | 4% | -38% | 37% | $ 5,729,293,811.04 |
| BRL | Bathurst Res Ltd. | 0.92 | 3% | -3% | 6% | -19% | $ 171,267,003.10 |
| CRN | Coronado Global Res | 1.525 | -1% | 15% | -26% | -2% | $ 2,523,062,863.65 |
| JAL | Jameson Resources | 0.061 | 2% | -19% | -37% | -13% | $ 23,882,177.10 |
| TER | Terracom Ltd | 0.425 | -3% | -17% | -57% | -29% | $ 324,391,325.18 |
| ATU | Atrum Coal Ltd | 0.005 | 0% | 0% | -17% | -14% | $ 6,958,495.86 |
| MCM | Mc Mining Ltd | 0.135 | -4% | -21% | -41% | 77% | $ 53,954,802.27 |
| DBI | Dalrymple Bay | 2.65 | -2% | 2% | 9% | 35% | $ 1,318,726,034.22 |
| AQC | Auspaccoal Ltd | 0.13 | -7% | -13% | -46% | 13% | $ 45,150,423.89 |
