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Mining
Iron ore developer Magnetite Mines is well-placed to progress a DFS on its high-grade Razorback project as the pendulum swings towards higher-grade mines.
As Australia embraces net zero and global moves to green up the steel industry increase, Magnetite Mines (ASX:MGT) believes that the Razorback high-grade product will be embraced.
“We have observed a heightened focus and interest in pathways to low-emissions steel this year and as a high-grade project, we believe that the Razorback product will be well suited to lower-emissions steelmaking,” Magnetite Mines executive chairman and CEO Peter Schubert said.
“During the (September) quarter, we have further advanced discussions with potential partners and financiers and ESG attributes are a critical factor for many industry participants.”
Steelmaking is responsible for 8% of all CO2 emissions, largely generated through the carbon intensive blast furnace process and ‘green steel’ is increasingly being talked about.
Premiums for high-grade iron ore are increasing partly because they generate steel with more efficiency. That will only increase in the future with new technologies like green steel and hydrogen based direct reduced iron expected to be reliant on higher-grade ores.
According to a PFS released by Magnetite in July, Razorback will be among the world’s highest-grade producers, producing around 3Mtpa of a 68% concentrate grade expected to garner a substantial premium over the benchmark 62% fines price.
“The PFS was a significant milestone for the company which demonstrated the robustness of our high-grade iron ore project across a range of iron ore pricing scenarios and validated our staged, low-capital development pathway,” Schubert said.
Based on a 473Mt ore reserve, still representing only a fraction of the resource at the Razorback project, the PFS confirmed it would be a high-return, long-life development.
Razorback is expected to leverage the advantages of resource scale, a low stripping ratio, available infrastructure, low-cost sustainable power and leading product quality.
Magnetite Mines assessed a number of scenarios to determine the best option to move ahead with in its DFS.
The company believes an optimised concentrator with the use of selective mining and/or ore sorting to improve head grades will deliver the best outcome, producing at a capacity of 3Mtpa of high-grade iron ore a year.
Magnetite generated a preferred flowsheet and plant layout during the PFS process which has significant advantages in efficiency and separation over the more conventional configuration used in scoping study estimates, with the inclusion of flotation ensuring efficient production of high product quality concentrate.
The project is expected to generate attractive returns at long run benchmark average iron ore prices of US$110/t, around current levels, and at higher rates of US$150/t, where iron ore prices sat not too long ago.
Remember, Magnetite is expected to command a US$25/t premium over the prevailing price based on typical historic grade and quality adjustments.
The PFS showed the ~$675m Razorback project would breakeven at just a US$54/t benchmark price, with a NPV of $669 million at US$110/t benchmark price and $1.54 billion at a price of US$150/t.
The project would pay back in five years, generating cashflows of $141 million a year at current prices and $237 million a year with a capital payback of just 2.3 years at US$150/t benchmark prices.
Given numbers like those, it is little wonder Magnetite has pushed ahead with its DFS which is set to be delivered by the end of 2022 ahead of a decision to mine.
Throughout the September quarter, Magnetite delivered a number of key appointments for the major study, including process plant experts Hatch and power and non-process infrastructure consultant GHD.
“We have continued our practice of securing best-in-class contractors to support our expanded team with the appointment of Hatch and GHD,” Schubert said.
“We will work to industry best practice to ensure the study phases accurately estimate the parameters of the project we will build and meet the standards of potential financial partners.”
Foraco have also come on board after the end of the September quarter as drilling contractors work to deliver the initial metallurgical drilling program at the Iron Peak deposit.
Permitting and consultation with stakeholders for further drilling programs including water exploration, infill drilling and resource extension ‘step-out’ drilling is also underway.
Metallurgical drilling, which is being undertaken following consultation with Traditional Owners, stakeholders and government agencies, is a key step in the DFS process.
The environmental approval and planning process is also under way.
“Critically for the project approval program, Magnetite Mines formally commenced its broad engagement with South Australian regulatory agencies in support of the project approvals program,” Magnetite Mines said.
“A kick-off meeting was held with representatives of five principal agencies, and addressed the project design, approvals schedule, baseline environmental assessment outcomes and early-stage project risks and opportunities.”
Magnetite Mines has stamped its credentials as an ESG-focused iron ore company.
For starters, its high-grade concentrate is expected to be valued by aiming to produce greener steel.
The Razorback mine itself is also likely to be powered substantially by renewable energy.
Rather than a standalone remote power plant, the company believes the best option is to install a 132kV transmission line from the mine to the SE Australian grid in Robertstown, about 130km to the south.
South Australia is already powered 60% by renewable energy, largely wind and solar, a figure only likely to grow by the time Razorback is expected to produce iron ore in 2024.
Magnetite Mines has progressed a number of environmental, social and governance initiatives in the September quarter:
Magnetite Mines remains well stocked to push ahead with its DFS, with around $15.1 million in the bank as of September 30.
The company spent around $846,000 on exploration activities including field work, met testwork, DFS preparation and drill permitting.
No drilling was required in the quarter due to the availability of historical drill samples and datasets, but it is expected to ramp up in the months ahead.
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.
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