Special Report: Magnetite Mines has taken an important step forward with a farm-in deal that will give the explorer a solid pathway to production for its 4-billion-tonne Razorback iron ore mine in South Australia.

Magnetite Mines (ASX:MGT) has reached agreement on the material terms of a $20m farm-in offer with Braemar Mining Developments (BMD) — announced to market in April — and has now executed a non-binding term sheet.

The terms of the deal allow for a staged farm-in and will see BMD fund a bulk ore sorting trial and then a pre-feasibility study (PFS) for the Razorback project to earn a 49.99 per cent interest.

BMD is backed by global leading independent adviser and investor in the natural resources market, RFC Ambrian Group.

What drew RFC Ambrian to the Razorback project was Magnetite Mines’ plan to use CSIRO-developed tech that makes it much simpler to sort the low-grade from the high-grade stuff.

Magnetite Mines has exclusivity over the technology for Magnetite in Australia.

NextOre is the company advancing the magnetic resonance (MR) ore sorting technology. It is a joint venture between the CSIRO, RFC Ambrian and Advisian.

This particular tech will give Magnetite Mines a leg up in the processing of its ore because it will significantly lower the cost of processing while at the same time deliver a higher head grade to the concentrator.

And that helps deliver a high-grade final product -– previous lab tests have delivered grades of nearly 70 per cent.

That’s a grade that not even heavyweights BHP (ASX:BHP) and Rio Tinto (ASX:RIO) can produce.

“The board is pleased to be working with BMD as the NextOre technology has the potential to enhance Razorback’s project economics, and BMD is expected to access new pools of potential investment capital to allow the Razorback iron ore project to move towards a staged, low-capital development,” Magnetite Mines chairman Peter Schubert said.

 

The finer details

Under the deal, Magnetite Mines has the option of choosing to co-fund a bankable feasibility study (BFS).

This means the company will retain a majority interest in the Razorback project, with a final interest of at least 50.01 per cent if it chooses to exercise its co-funding rights through the proposed stages.

If a binding deal is reached, the farm-in will be carried out in three stages.

Under stage one, BMD can earn up to a 30 per cent interest by spending $5m on the project and completing the NextOre trial, including commercial testing of the technology.

Stage two will see BMD boost its stake to 19.99 per cent if it spends a further $5m with the intent to complete a PFS. Magnetite has the option to fund 50 per cent of the stage-two PFS work.

The final stage gives Magnetite Mines the option of co-funding a BFS to retain a 50.01 per cent interest or allowing BMD to increase its stake to 70 per cent by spending $10m to sole fund the BFS.

While BMD is progressing its fundraising activities, Magnetite Mines is moving quickly at the Razorback project, with work starting on orebody modelling, mining studies and metallurgical investigations.

Until a binding agreement is concluded, the company will continue to assess and pursue all opportunities for development of the Razorback iron ore project.

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This story was developed in collaboration with Magnetite Mines, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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