Premium product strengthens Razorback’s case

Magnetite Mines technical director Mark Eames explains why the Razorback project is a standout prospect in Australia’s iron ore sector.

Magnetite Mines’ Razorback premium grade magnetite concentrate project in South Australia enjoys a unique set of advantages.

Those advantages have come shining through in a high-level pre-feasibility study (PFS) into a long-life project development.

The PFS, released in July, outlined a robust investment case for the project, prompting Magnetite to proceed immediately to a definitive feasibility study (DFS) – a key milestone towards securing development finance over the next 12-18 months.

The “go forward’’ scenario in the PFS envisaged an initial $675 million project processing 15.5 million tonnes a year of selectively mined and upgraded iron ore to produce 2.7 million tonnes a year of premium grade magnetite concentrate (67.5-68.5 per cent iron content).

The post-tax internal rate of return was put at 20 per cent assuming a $US110 ($149) a tonne long run average benchmark price (62 per cent iron), rising to 33 per cent at $US150 a tonne – close to the average benchmark price for the 2021 financial year.

Magnetite technical director Mark Eames, formerly a senior iron ore executive with Rio Tinto and BHP, says that a “massive amount of effort had gone in to the PFS.’’ 

“What we’ve put forward is to a very high standard. It would pass muster with any of the major mining companies. It has also confirmed we’ve got a really good project on our hands,” Eames says.

“Importantly, it means investors can form a really clear picture of the project. We will be following the same systematic and rigorous pathway in the DFS which we are now forging ahead with.’’

Magnetite Mines technical director Mark Eames.

Eames says the PFS has confirmed a high return and long life project enjoying a unique combination of inherent advantages – a low stripping ratio, access to existing infrastructure, the availability of low cost sustainable power and leading product quality.

The PFS was based on a maiden probable ore reserve of 473 million tonnes, good for a mine life of 23 years at the initial planned production rate.

The potential for future expansions and mine life extensions is highlighted by the 5.7 billion tonne mineral resource estimate for Razorback (three billion tonnes) and other deposits.

“We will be starting relatively small. But we will be scaling up as we move forward and prove the performance of the initial development. It is a very sensible pathway,’’ Eames says.

Because of the project’s premium grade product, the PFS assumed it would sell at a 23 per cent premium to the 62 per cent benchmark price.

Eames says the company believes premium prices for high-grade product like that to be produced at Razorback “are here to stay.’’

“Our high grade-grade product is going to set us up for the long term, particularly in a world where there is increasing pressure for the steel industry to improve its environmental sustainability,” he says.

“You can’t make low emissions steel out of low-grade iron ore because it takes too much energy to melt out the impurities. So it is best to start with a high-grade product.

“And with our project, we can run on power from the South Australia grid which is already two-thirds renewable. It’s low cost too.” 

This story also appears in the October issue of Australian Resources & Investment.

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