Special Report: Magnetite Mines is raising up $5.65m through a rights issue to accelerate pre-feasibility work on its 4-billion-tonne Razorback iron ore mine in South Australia.

The rights issue for existing shareholders is partially underwritten by Mahe Capital to the tune of $4m, which company director Mark Eames says gives shareholders some extra surety that the funds will be raised.

Eligible shareholders of Magnetite Mines (ASX:MGT) will be offered the opportunity to acquire one new MGT share priced at 1c, or a 27 per cent discount to the 10-day volume weighted average price, for every four shares that they hold.

Additionally, one free attaching option exercisable at 5c and expiring on October 29, 2021, will be issue for every two shares subscribed.

All directors in the company have already flagged that they will participate in the 1 for 4 renounceable rights issue.

Eames told Stockhead that while there were other ways that the company could have raised funds, such as a share placement or looking for a strategic partner, it chose to give shareholders a chance to participate in the potential growth story.

“Even though it’s a little bit slower than some other means, we’ve actually given the opportunity to existing shareholders to participate,” he said.

The rights issue closes on September 29.


Accelerating iron ore study

Eames said the rights issue will allow Magnetite Mines to accelerate the work on the pre-feasibility study (PFS) to develop the optimum business case for Razorback.

“We’ve been getting some exciting results including the work in investigating high grade zones in the orebody which gives us the opportunity for selective mining,” he said.

Magnetite Mines’ Razorback Iron Project.

Initial studies have confirmed the lateral continuity of high-grade iron ore horizons within the existing resource are potentially amenable to selective mining.

This method, which has been used successfully by major iron ore miners like Fortescue Metals Group (ASX:FMG), can be combined with complementary ore sorting to deliver higher grade ore to the processing plant.

Test work has already demonstrated that it can produce grades of nearly 70 per cent iron.

“We are following a very well thought out and systematic approach to our development pathways. We are very much focused on doing the technical work that will ensure we get a good result from the project.” Eames said.

“We’re following a very rigorous study program, so we’re not just sort of rushing out and trying to do things, we’re actually systematically working through all of the options for the project and making sure we’ve selected the best one so that ultimately will give us the best returns and the lowest risk for a future investment.”

Executive chairman Peter Schubert noted in today’s announcement that value metrics for a supplier of high-grade iron ore concentrate have never been better and that the PFS would help Magnetite Mines optimise the value of the Razorback project.


Low-cost iron ore project

The Razorback project has all the right ingredients to make it a lower cost development project than other mines.

Not only is the resource is at surface with low stripping ratios, it also features rocks that are much softer than other iron ore projects and thus require less energy to grind.

Steelmakers in China are also increasingly demanding more processed ores like magnetite as stocks of direct shipping ore are depleted.



This article was developed in collaboration with Magnetite Mines, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.