Iron giants, red metal: record prices highlight SA mineral potential
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There’s no doubt it’s a positive time for those trading in resources, with two commodities in particular – copper and iron ore – hitting all-time price highs in the last few days alone.
The basis on which those highs have been achieved is slightly different – copper’s run is seemingly attached to the emerging and long-term green transition and rumours of rising royalties in Chile and Peru, while in very simple terms iron ore’s price hike comes from a combination of booming Chinese manufacturing and construction, a supply shortfall, and pandemic challenges in the nation’s main commodity rival Brazil.
Australia has become known over many years for its mineral endowment and expertise in exploration and extraction – in many aspects around the resources sector and its associated industries we lead the world.
But while the Pilbara may steal the headlines in the iron ore space, and the Lachlan Fold Belt seems to be the hot play for copper explorers, Australia spreads far and wide. So too should the investment conversation.
One state which punches well above its weight but perhaps a little under the radar in recent conversation is South Australia – remarkably well endowed in its own right and with projects established and emerging in both the steelmaking component and the red metal.
Yes, there can be no denying that the Pilbara region of Western Australia dominates the conversation when it comes to Australian iron ore, and with good reason.
According to Geoscience Australia’s Australian Identified Mineral Resources 2020 report released earlier this year, the region is home to some 83% of economic demonstrated resources – it seems red dirt is as synonymous with the Pilbara as red cans (Emu Export) and Red Dog (RIP).
But just because the bulk of the nation’s economic demonstrated resources are borne of the Pilbara region, it doesn’t necessarily mean that’s where investors are going to find the best bang for their buck, or explorers the highest-grade ore for their trucks (or boats).
A quick glance at this map gives a fair indication of where we’re heading with this one.
Aaaand we’re there.
According to the state’s Department for Energy and Mining, South Australia’s main regions for iron ore resources are the Gawler Craton and the Braemar iron region.
Iron ore has been produced from SA for longer than any other state in the nation – WA included – and its iron ore tends to have some characteristics which differentiate it from that of WA’s north.
While Pilbara ore is typically hematite – higher grade in the ground, and suitable for direct shipping – magnetite deposits like many of those found in SA tend to be lower grade in the ground but produce very high-grade products over a long lifespan.
Upgrading magnetite, which is used to make around a third of the world’s steel, is pretty simple.
The ore’s magnetic qualities mean if you grind it and put it under magnet, the magnetite will separate from the remainder with ease. Good news for those with it, since steel producers have recently shown a willingness to pay serious price premiums for high-grade product.
This quality, combined with the world’s appetite for iron ore (US$230/t at time of writing) and the fact that the Pilbara’s resources have been mined pretty much non-stop since before the moon landing, bode well for those with deposits in the area.
In the Braemar region, that includes Magnetite Mines (ASX:MGT) – developer of the 4 billion tonne high-grade Razorback iron ore concentrate project.
That project’s rock is said to be softer than the magnetite that is sometimes found in the Pilbara, meaning easier and lower energy processing.
Magnetite recently raised $7 million through a share placement to institutional investors as it works towards an extensive prefeasibility study scheduled for before the end of the June quarter.
The placement was made at a premium to the company’s previous closing price.
Iron Road (ASX:IRD) holds the advanced Central Eyre iron project, and has concurrently set up a partnership arrangement with Eyre Peninsula Co-operative Bulk Handling and Macquarie Capital to get required port infrastructure funded.
The company is also looking to attract funds for its iron ore project and monetise “early-stage green hydrogen partnerships”.
Havilah Resources (ASX:HAV) owns the Grants and Maldorky iron ore deposits in the Braemar region – each with JORC resources – though its flagship project as outlined in its most recent quarterly report was the Kalkaroo copper-gold-cobalt project 400km north of Adelaide.
Over at the Gawler Craton, privately-owned SIMEC produces 10 million tonnes of iron ore per annum in the Middleback Ranges – including hematite and magnetite – from the Iron Baron, Iron Knob and South Middleback Ranges minesites.
The output is railed and piped to Whyalla, home of the famous steelworks facility, where the magnetite is pelletised and both products loaded to ships.
According to SIMEC, the resources and reserves across the Middleback Ranges mines come in at just under half a billion tonnes.
Privately owned Peak Iron Mines is also producing, developing and exploring from the Gawler Craton, one of a few private companies to do so in the state.
And while that admittedly incomplete list may pale in comparison to the sizeable iron ore miners of the Pilbara, it’s worth noting those who hold prospective land in the area.
A quick search on the South Australian Resources Information Gateway database reveals FMG Resources – the wholly-owned subsidiary of Fortescue Metals Group (ASX:FMG) – has quietly picked up a number of exploration licences in recent years.
A number of these include iron among the list of commodities sought by Twiggy Forrest’s WA-founded iron powerhouse.
This one’s a little more obvious, given the presence of BHP’s (ASX:BHP) behemoth Olympic Dam underground copper mine (which also happens to produce uranium, gold and silver – how convenient).
Taking it back a step for a moment. South Australia is home to 67% of Australia’s copper economic demonstrated resources – here’s the map.
The biggest circle on that map is Olympic Dam, with Oz Minerals’ (ASX:OZL) Carrapateena and Prominent Hill copper-golds flanking it to either side.
But the state’s broad copper potential beyond the major producers is something which should also buoy smaller-cap investors.
Among those with copper exploration projects in the state include Auroch Minerals (ASX:AOU) – owner of the Arden and Torrens East copper-zinc projects. The former sits in the Olympic Dam province, the latter 315km north of Adelaide.
That company also holds nickel projects in WA.
Meanwhile, Cohiba Minerals (ASX:CHK) has been particularly active in its pursuit of copper-gold in BHP’s neighbourhood, announcing last month that it had plans to drill up to 19,000m after drilling at the Horse Well prospect in March suggested it was potentially sitting on the next big iron oxide-copper-gold deposit.
Newcomer Torrens Mining (ASX:TRN), which listed early in January, is part of a joint venture with Coda Minerals (ASX:COD) on the Elizabeth Creek project in the same province. The latter funds and manages the project under a farm-in arrangement in which it holds the majority stake.
Developers. Havilah gets its second mention here, with aforementioned flagship Kalkaroo billed “one of the largest undeveloped open pit copper deposits in Australia” by the company.
That project would cost $332 million to build and produce 30,000 tonnes of copper and 72,000 ounces of gold each year over an initial 13-year period. Not bad.
The company is hoping to start mining a low-cost open pit gold mine from 2022, before moving onto the copper orebody later on.
Finally, Hillgrove Resources (ASX:HGO). The once-miner which produced from an open pit at its Kanmantoo copper-gold project from 2011-2019, aspires to be a miner once more.
The first stint wasn’t financially successful for the company, but a new program of drilling and studies is funded and underway to reach a final investment decision on a low-capex Kanamantoo underground mine development in the second half of the year.
The company believes that restart would generate substantial cash at current prices and de-risk further development.
At Stockhead, we tell it like it is. While Magnetite Mines and Auroch Minerals are Stockhead advertisers, they did not sponsor this article.