Home / World News / Magnetite back in vogue as Macarthur sets course for production

Magnetite back in vogue as Macarthur sets course for production

Once considered the poor cousin to hematite, magnetite is back in vogue with iron players who are finding it hard going to consistently discover more hematite deposits.

Big players like Mineral Resources’ Chris Ellison and others have recently turned their attention to magnetite, clearly frustrated at the rate of discovery of more economic hematite resources.

Whilst there is an added and sometimes costly stage required to process magnetite when compared to hematite known as “beneficiation”, magnetite deposits are often of biblical scale and the final grades post beneficiation blitz run of the mill direct shipping hematite grades.

Up and coming magnetite developer Macarthur Minerals recently spun out its precious and battery metals assets to focus on its magnetite iron ore projects that boast estimated post beneficiation grades up to a stellar 69 per cent iron near the port of Esperance in the Southern Cross province northwest of Kalgoorlie in WA.

Importantly Macarthur has locked in a reliable life of mine offtake partner with a 10-year binding agreement recently signed with mega-miner and mineral trader Glencore International A.G.

Notably Glencore turned out an adjusted EBITDA last year of some US$21b – almost double its prior year performance – which means it is probably one of the few players out there with deep enough pockets to catapult a massive scale magnetite play into production.

Macarthur is laser focused on commercialising its iron ore projects and is making serious headway towards completing a bankable feasibility study that it plans to wrap up by the end of March.

The company’s flagship asset is its 100 per cent owned Lake Giles iron ore project, comprising the Moonshine magnetite prospect and also the Ularring hematite prospect that has already been approved for development.

A scoping study on the project was undertaken in June 2019 that produced a lovely set of numbers that included a serious net present value of $535 million, a 21 per cent internal rate of return, a three-year capital payback period and a whopping 31 year project life.

Notably, all results from the scoping study were estimated using a conservative long-term price assumption of US$86 per tonne and a long-term USD/AUD exchange rate of $0.70.

Since receiving results from the scoping study Macarthur has not only secured an off-take partner but has also acquired a generous parcel of land for the development of site infrastructure and received a proposal to develop rail access.

Following receival of positive final results from the bankable feasibility study and receipt of final development approvals, Macarthur plans to launch into construction with an estimated completion date between 18 and 20 months from commencement. Initial production is then earmarked to commence shortly after in the first quarter of 2024.

Macarthur believes it has the winning ticket in the magnetite production game due to a few key factors.

Its iron ore resources are huge, multi-generational deposits and are all located within the tier 1 mining jurisdiction of Western Australia close to dependable ports with low sovereign risk. The true key to success however according to the company is the all-important life of mine offtake agreement with Glencore who has been very active in the off-take market of late.

The offtake agreement with Glencore was signed in March 2019. Agreed terms will see Glencore pick up approximately 4 million tonnes per annum for the first 10 years with an option to extend for another 10 years. Additionally, Glencore is to take possession of the iron ore on a free on board or “FOB” basis, meaning Macarthur only holds responsibility for the product until it is loaded onto shipping vessels.

Glencore is responsible for marketing, shipping, delivery and insurance and has agreed to release up to 70 per cent of the off-take volume if and when Macarthur secures project financing from a strategic industry investor.

For the past decade China has well and truly dominated the iron ore market with an estimated 50 per cent of global consumption and approximately 80 per cent of that amount arriving by means of carbon dioxide intensive seaborne iron ore trade.

Air pollution in China is beginning to finally attract the attention of those in power with increased regulations put in place through the country’s Blue Sky Action Plan that shines a light on the production and use of iron ore, coking coal and natural gas in China.

Importantly, iron ore from Lake Giles boasts a high-grade, low-impurity product that permits steel mills to optimise and balance lower quality ore blends to increase efficiency, lower costs and reduce carbon dioxide emissions in the blast furnace.

The Lake Giles project houses one of the largest undeveloped high grade magnetite projects in the world. The inferred mineral resource estimate for the company’s Moonshine deposit clocks in at a massive 449.1 million tonnes grading 28.4 per cent iron and an average concentrate grade of 64.6 per cent iron.

Macarthur houses a further 548 million tonnes across all of its other WA based magnetite deposits with an average head grade of 29.5 per cent iron and a 64.3 per cent average concentrate iron grade.

The standard grade of iron ore going into the Chinese market hovers around 62 per cent – typically from direct ship hematite players.

The ore from Lake Giles is expected to attract a premium price thanks to its high beneficiated grade along with its low levels of alumina, phosphorous and sulphur impurities.

Lake Giles ore that falls into the 65-68 per cent category is expected to reap the rewards of a significantly increased premium of up to US$20 per tonne according to Paradigm Capital. The premium is a result of the Chinese government’s Blue Sky initiative with higher-grade iron ore boasting a higher efficiency and ability to reduce polluting gasses

Macarthur looks to have consolidated a serious magnetite iron ore asset in the Yilgarn with close access to a reliable port. Its true value however lies in its ground-breaking offtake agreement with global juggernaut Glencore. Whilst traditional hematite resources around the world have been depleting rapidly, demand from steelmakers has not.

Our Management Team will now be working on delivering against a number of material milestones that they have set for themselves as we transition from explorer to producer.

Chief amongst these will be completing and delivering the Bankable Feasibility Study for the Lake Giles Iron Project which is now materially advanced and entering its final stages. Following completion of the Study we will be working with our financial advisers to put in place project finance to construct our high-grade magnetite mine. With the Feasibility Study nearing completion (and subject to closing of finance) Macarthur anticipates that a commencement of commercial production of magnetite mining operations at Lake Giles by 2024 is still achievable at this stage.

The requirement for large-scale, high-grade iron is still there and it seems that some of the big names are already out front of the pack locking in the next wave of iron ore production from magnetite. Macarthur looks to have the right asset in the right location and with a bankable feasibility study due out by the end of the month, it is game on now for this magnetite developer.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au

About brandsauthority

Check Also

US says Hive ransomware gang taken down

The United States Justice Department says a ransomware gang called Hive, which had targeted more …

%d bloggers like this: