Squeeze from Brazilian iron ore disasters a boon for $1.5B magnetite pellet project
Brazil’s spate of iron ore mine and tailings dam calamities are proving a game-changer for global iron ore pellet feed markets, according to the developer of a proposed new $1.5 billion magnetite iron ore pellet project near Broken Hill.
Addressing the first day today of the two-day Paydirt 2019 South Australian Resources and Energy Investment Conference in Adelaide, Carpentaria Resources’ Managing Director, Quentin Hill, said the Brazilian mine dam collapses and resultant forced shutdown of some of that country’s iron ore mines had caused a major seaborne supply squeeze across all of the commodity’s types.
“Before the Brazil factor, there was already an increasing supply gap in the pellet feed market and shortages in the Middle East particularly, but this has been amplified by the Brazilian iron ore sector disasters,” Mr. Hill said.
“The global pellet feed market was already in need of new pellet feed mines, but the Brazilian impacts have disrupted the overall iron ore seaborne market by between 50-70Mtpa, of which 10-15 Mtpa of that is for iron ore pellets.
“This will favour the development of our Hawsons magnetite pellet project, 60 kilometres southwest of Broken Hill on the SA border, and at a time we are looking to finalise remaining funding to complete the project’s bankable feasibility study (BFS).”
Japan’s Mitsui has already committed to fund 20% of Hawsons’ BFS. Mr. Hill says negotiations for the remaining 80% of the BFS cost are well advanced with multiple potential Tier 1 parties around equity and non-dilutive offtake linked arrangements to also include part of the mine construction cost.
“The market pull for Hawsons to be developed is very strong. We are highly confident of successful completion of the remaining BFS funding of around $20 million.”
Wood Mackenzie has rated Hawsons as the leading project of its type in the world, a rating Mr. Hill says can only be enhanced by the severe and likely prolonged supply disruptions out of Brazil.
Hawsons boasts a 70% Fe grade over a 330Mt resource, of which 111Mt is in the probable reserves category. The project site is close to major rail export infrastructure west to Port Pirie or Whyalla, with some 10Mtpa of output to be sent by slurry pipeline 55 kilometres direct to Broken Hill.
Mining and processing will be conducted on site. Final project costs will depend on whether Carpentaria selects Port Pirie or Whyalla as the final export outlet.
Hawsons has attracted major project status from the federal government. Production is expected to commence within three years of financing.
Carpentaria has tentatively slotted in finalising all project financing by Q4 2020, with first production by Q2 2022 at a rate of 10mtpa.
Studies have estimated a robust early payback of under 2.5 to four years for a high-margin project that is cash flow positive at under $30 a tonne.