Proponents of the large Hawsons magnetite iron ore project on the South Australian border just south of Broken Hill say the equity markets have failed to heed the long-term demand dynamics for pellet feed products and have under-estimated the opportunity for Australia to further cement its place in globally traded iron ore sea routes.
The concern was expressed as Carpentaria Exploration prepares to finalise its key prefeasibility study for Hawsons by the end of next month.
Addressing the Paydirt 2017 South Australian Resources and Energy Investment Conference in Adelaide, Carpentaria’s managing director Quentin Hill said the demand growth for pellet feed was stronger than all other segments in the iron ore market as was the demand for high-grade pellet products.
“There is a consensus that the long-term iron ore price will float between US$55-65 per tonne but very few high grade pellet feed projects can be incentivised within this range because of extra grinding costs and yield losses of up to 15% during beneficiation,” he said.
“Those steels mills that can access this material have not only have an edge over their rivals but it creates a competitive tension, and it is this demand dynamics that will drive development of the Hawsons iron project.”
In a substantial departure from sector norms, and considering the project is yet to reach an advanced stage, around 80% of Hawsons’ potential output has already been signed into offtake agreements with blue chip majors such as Mitsubishi, Formosa Plastics, Bahrain Steel, Emirates Steel and Gunvor.
“We expect that the PFS will increase the investment grade of Hawsons and therefore the pool of potential investors for the project,” Quentin Hill said.
“Hawsons is a Direct Reduction (DR) pellet feed iron ore project and can produce a quality product confined to just four majors commanding 90% of this market segment from 10 projects.
“In particular, new and diversified sources of pellet supply are needed for the Middle East to support its DRI industry and to offset the pricing power of existing producers.
“This has brought Bahrain Steel and Emirates Steel to Carpentaria’s door with Letters of Interest to take 3.9mtpa of Hawsons DR feed.
“Unlike other concentrate projects which would struggle at current prices, Hawsons has the high grade premium attracting quality, its ore is soft so it has a mining and processing technological advantage, and it has negligible yield losses at its upgrade step.
“If we hit our PFS targets next month, Hawsons will be one of the very few high grade pellet feed projects that can be incentivised at long-term pricing, making this project strategically important globally.”
He said Carpentaria had been largely ignored by equity markets as they did not yet understand the segment’s dynamics and Carpentaria had focused instead on the traders and steel makers that have an appreciation of the pellet feed sector.
“This has fed the emergence of initial and strong offtake agreements,” he said.
Hawsons has a resource of 330 million tonnes of concentrate product of which 120 million tonnes is now in the indicated resource category.
Early discussions have been initiated around project funding.