Native title deal paves way for development of Strike’s iron ore project

Special Report: Strike Resources has hit a key milestone with the execution of the Native Title agreement for its high-grade, low-risk Paulsens East iron ore project in WA.

At the same time iron ore is currently trading above $US115 ($159.9) a tonne due to increased demand from China and the COVID-19 pandemic’s impact on Brazilian iron ore supply.

Strike Resources (ASX:SRK) will now lodge the state deed with the Department of Mines, Industry Regulation and Safety (DMIRS) for the grant of a project mining lease before submitting its formal application for a mining permit.

The company says the DMIRS has an internal target of processing mining proposals for the issue of mining permits within 30 business days.

Managing director William Johnson thanked the Puutu Kunti Kurrama and Pinikura People (PKKP) and its representatives for their continued support for the Native Title Agreement, which provides a framework for Strike to undertake its mining activities in a way that minimises any impacts on Aboriginal cultural heritage and provides a package of financial and business development related benefits for PKKP members.

“The execution of the Mining Agreement and State Deed is a key milestone in the development of the project and allows Strike to continue to fast track development of the project to take maximum advantage of current high iron ore prices,” he added.

High-grade iron ore project on the fast track to production

There is much to like about the Paulsens East direct shipping ore (DSO) project in WA’s Pilbara region.

DSO refers to minerals that require only minimal processing such as crushing before they are exported, which keeps costs low.

And that is certainly true for Strike, which expects to pay a very low $8.2m to build an iron ore project that will produce 1.5 million tonnes per annum of mainly 61 per cent lump iron ore for an initial mine life of four years.

Net profit is forecast at between $82m and $236m – with a ‘base case’ of $150m – over this initial mine life, meaning that the paltry cost of bringing the project into fruition can be paid back in just over three months.

This is thanks to the attractive breakeven price of $US65/tonne while the scoping study assumes a sale price of US$85/tonne. With the iron ore price currently trading significantly higher than that at US119.5/tonne , Strike could bank an even bigger profit. These profits are significantly higher than the current Strike market capitalisation of only $15m.

Upside iron ore potential

The current economics also do not take into account the company’s recent discovery of a potential 1.6km mineralisation extension.

This could increase resource at Paulsens East by up to 50 per cent given that the current resource of 9.6 million tonnes at 61.1 per cent iron is contained within a 3km strike length.

This article was developed in collaboration with Strike Resources, 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.