Strike works quickly at Paulsens East to take advantage of strong iron ore price
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Special Report: Strike Resources only just delivered its very first high-grade iron ore resource for its Paulsens East project in the Pilbara and it is now advancing quickly toward an upgrade and has started mine planning.
The company (ASX:SRK) is only about four to six weeks out from converting its initial inferred resource of 9.1 million tonnes at 63.4 per cent iron ore to a higher confidence indicated resource.
Mineral resources are categorised in order of increasing geological confidence as inferred, indicated or measured.
By moving resources into the indicated category, it means a company has sufficient information on geology and grade continuity to support mine planning.
On that front, Strike has completed a topographic survey and engaged a mining engineering consultancy firm to develop a detailed mine plan.
The company is also in talks with trucking providers, contract miners and a number of port facilities.
And Strike is making good progress on locking in sales deals for Paulsens East thanks to its extensive links to the global iron ore industry, in particular through the connections of long time Strike director and industry veteran Malcolm Richmond, who is ex-Rio Tinto (ASX:RIO) and Hamersley Iron.
The company has been able to engage with a number of potential offtake partners for Paulsens East and expects to secure one or more binding offtake agreements over the coming months.
Given the iron ore grades associated with the project, Strike is hoping to secure premium prices for its ore.
“Strike is making great progress in advancing the high-grade Paulsens East iron ore project in the Pilbara, as we aim to take advantage of current high iron ore prices,” managing director William Johnson said.
“We are rapidly advancing the project on multiple fronts and will continue to update the market as we proceed with ongoing development.”
Strike is also advancing the process of converting Paulsen East to a mining licence, with a draft submission recently handed to the WA Department of Mines.
The market welcomed the news, pushing shares up 6.4 per cent to 6.7c on Thursday.
There are very few junior explorers in the iron ore space as it is, but even less with such high-grade. The grade of Strike’s resource is higher than even what the bigger players are producing.
Iron ore prices hit $US126.40 ($184.56) per tonne in early July, but while they have edged back since, S&P Global Market Intelligence predicts prices for 62 per cent iron ore will still average $US95.50 per tonne in 2020.
Strike has had its Western Australian and Peruvian projects for nearly 15 years and has done a fair bit of work on each in the past.
Now the iron ore price has picked up substantially, the company is well placed to take the projects through to production – hence why it was so quick to define an initial resource after only recently dusting off the projects.
Paulsens East is located in the extremely iron ore fertile Pilbara region – well known as the home to iron ore heavyweights Rio Tinto, BHP (ASX:BHP) and Fortescue Metals Group (ASX:FMG).
Strike is investigating the potential for an up to a 1-million-tonne-per-annum direct shipping ore (DSO) operation at Paulsens East.
DSO refers to minerals that require only simple crushing before they are exported, which keeps costs low.
A key feature of the Paulsens East resource is an approximately 3km-long ridge of outcropping hematite conglomerate which extends up to 60m above the surrounding terrain.
It is estimated that the outcropping portion contains about 2 million tonnes of high-grade 62 per cent potential DSO material that may be able to be mined with minimal overburden.
This would mean mining could be undertaken relatively simply using shovels and trucks, with the material then to be crushed and screened on site prior to transport by road to a suitable port facility for export.
“We believe we can fast-track this asset to development in the next six to nine months and generate potential significant cash flow in this strong iron ore price environment,” Johnson said.