It’s no doubt 2016 was another tumultuous year for iron ore, with prices reaching $US82.40 a tonne in December, more than double the depressed $US37 a tonne during the same month in 2015.
Largely attributed to strong Chinese investment in infrastructure, the December 2016 price increase was the first time iron ore had risen above $US80 in two years.
Carpentaria Exploration interest
The lift in prices were a good sign for Carpentaria Exploration, and managing director Quentin Hill told Australian Mining it generated attention from investors.
“The rise of the iron ore price has certainly piqued a lot of interest in our company,” Hill said.
“[Investors are] certainly reacting very favourably to those higher prices.”
Carpentaria is developing the Hawsons iron project around 60 kilometres southwest of Broken Hill in New South Wales. According to the company, it is the largest magnetite discovery in eastern Australia.
Despite iron ore prices hitting up to $US80 last year, Hill said Carpentaria is not expecting to have such high prices during the development phase of the project.
“We’re positioning our project to be the first in the development queue and while a lot of proposed projects need the higher prices to be bankable, we are targeting a lower number in our bankability to be first in the queue,” he said.
“So while they’re nice, we don’t need it that high.
“You’d need a project demonstrating it can be bankable between $55 and $65 dollars a tonne and that’s going to be our target for our prefeasibility study.”
Hill emphasised that the company produced a unique Supergrade magnetite product, containing 70 per cent iron. This, he said, was particularly suitable in the direct reduction market and the blast furnace market as it can both increase productivity and reduce pollution.
“The Supergrade product is unique, it attracts a very high price that provides unique economic metrics for our project over and above other magnetite projects and indeed other iron projects,” he said.
Hill added that Carpentaria signed up approximately eight million tonnes of a planned 10 million tonnes of magnetite product with blue chip companies such as Formosa Plastics, Bahrain Steel and Emirates Steel.
On the back of that, the company has raised $2 million to upgrade the magnetite resource and then complete a prefeasibility study. It has particularly targeted the direct reduction market in the Middle East.
“We’ve signed up three million tonnes of pellet feed to Bahrain Steel to make direct reduction pellets for the local market in the Middle East,” Hill said.
“They traditionally get their feeds from only three or four suppliers and in fact only one at the moment. So, they’re very keen to encourage other suppliers into the market. And the same goes for Emirates Steel in the Middle East, they’ve signed up for 900,000 tonnes of direct reduction pellets.
“On the blast furnace side of things we’ve lined up Mitsubishi for a million tonnes of pellet feed and we’ve also lined up Formosa Plastics, who are building steelmaking facilities in Asia for two million tonnes, and another million tonnes has been signed to Gunvor in China for Chinese consumption.
“We’ve still got two million tonnes to go. We really haven’t had a concerted effort in India and China so we’re still pursuing those avenues, the response has been phenomenal.”
Getting the project up and running
Hill said Carpentaria encountered a few challenges during construction, particularly the iron ore price environment and trying to raise capital. However, much to his relief, the company does not have to build infrastructure, unlike other potential new projects.
“What we’ve got that other projects don’t have in terms of challenges [is] we don’t have to build a railway line, we don’t have to build a port, we don’t have to build a powerline. We have all the infrastructure for our project in place,” he said.
“We have an existing powerline 35 kilometres on the Sydney-Melbourne grid so it’s reliable, cheap power. We have identified our water solution that’s available under existing regulations.
“The railway line is six kilometres away, it has 13 million tonnes of spare capacity. It goes straight to a choice of ports – Port Pirie or Whyalla – and we understand we’d be able to get access to either of those ports.”
Gaining government support
Although the Hawsons project is in NSW, its product will be exported through South Australia – its location sitting between the border. It has received support from both governments, which Hill both acknowledged and appreciated.
This is particularly evident as South Australia announced a new magnetite strategy in May last year, committing an annual export goal of 50 million tonnes of iron ore by 2030. The strategy aims to secure around $10 billion of investment and grow the sector by more than 50 times.
“They understand the great benefits of our project for their state so they have invited us to be on the steering committee of the magnetite strategy,” Hill said.
“The magnetite strategy is very important for South Australia and it’s very important for us. We expect the government to work on that. It’s in development at the moment to help us promote our product and promote magnetite as an alternative feed for blast furnaces that meets the new trends in the iron ore industry.”
What’s next for Carpentaria?
Hill said the company has other gold prospects that are being drilled and hopes to find a joint venture partner for another discovery, the Advene gold project in NSW.
He called 2017 an exciting year for the company as it plans to release a prefeasibility study.
“What we think by releasing a successful prefeasibility study it will elevate us to investment grade to relevant funding institutions and strategic investors that we’re in conversations with now so that’s very exciting for us,” he concluded.