Special Report: Magnetite Mines’ 4-billion-tonne Razorback iron ore mine has caught the attention of a leading global resources backer that could provide the company with a solid pathway to production.  

Magnetite Mines (ASX:MGT) has been handed a non-binding indicative farm-in proposal that, if finalised, would see RFC Ambrian Group-founded Braemar Mining Developments (BMD) acquire a stake in the Razorback mine in South Australia.

RFC Ambrian, a leading independent adviser and investor in global natural resources, has tabled a proposal that envisages BMD taking a stake of up to 49.9 per cent and possibly up to 70 per cent depending on the funding arrangements.

Although talks are at an early stage, with the final terms still to be agreed on, the proposal could lead to a pathway to progressing the project, Magnetite Mines noted.

The basic structure of the deal would see BMD acquire up to a 49.9 per cent stake in the “globally significant” Razorback mine if Magnetite Mines contributes to funding the pre-feasibility and definitive feasibility studies.

If Magnetite Mines decides not to contribute to funding both studies, BMD would be able to take its stake to 70 per cent.


Tech the draw card

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

The company has exclusivity over the technology for 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 right stuff

The Razorback mine has all the right ingredients to make it a lower cost development project than other mines. The resource is at surface, so stripping ratios are low.

The project has some distinct advantages over other magnetite mines, particularly those in Western Australia which tend to be harder rock. (Softer rocks are much easier to process).

And grid-generated electricity (coal-fired and renewables) is much cheaper on the east coast than the west coast.

Razorback also has the advantage of being located close to rail, port and power infrastructure and has access to enough water to sustain a wet processing operation.


Government support

While there is plenty of iron ore in countries like Africa, there is also plenty of sovereign risk and endless red tape.

However, Australia also has an abundance of iron ore and the industry is a major contributor to the economy — meaning a whole lot less red tape for miners to get caught up in.

The South Australian government has a strong push underway to promote the state’s magnetite to steel producers.

It’s injecting $10bn in getting those resources out of the ground. By 2030, South Australia wants to be a leading global supplier of quality magnetite products for steelmaking.

And despite the myth that magnetite can’t be profitable, about a third of the world’s steel is made from processed or magnetite-rich ores and globally there’s a bunch of big successful mines that have been producing for years.

Magnetite Mines and BMD still need to nut out the finer details of the farm-in agreement.

The deal is conditional, among other things, on securing a technology access agreement with NextOre and RFC Ambrian completing a $10m capital raising on behalf of BMD within four months of a formal farm-in agreement being struck.

In parallel with this news, Magnetite Mines has a renounceable rights issue closing soon to secure funding for the next stage of work on project development.

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.