Magnetite Mines (ASX:MGT) - Premium Iron Ore Developer


by Lauren Evans

Magnetite Mines Limited (ASX:MGT) Executive Chairman and CEO Peter Schubert and Technical Director Mark Eames introduce the company's flagship Razorback project in the Braemar formation 240km north-east of Adelaide.

Lauren Evans: Hi. This is Lauren Evans for the Finance News Network. Joining me from Magnetite Mines (ASX:MGT) is Executive Chairman and CEO Peter Schubert and Technical Director Mark Eames. Peter and Mark, welcome to FNN, and it's nice to meet you both.

Peter Schubert: Hey, Lauren. Nice to meet you too.

Mark Eames: It's a pleasure, Lauren. Thank you.

Lauren Evans: So first up, Peter, can you start with an introduction to the company?

Peter Schubert: By way of background, Magnetite Mines has a very large mineral resource of around 5.7 billion tonnes of iron ore, around 240km from Adelaide in South Australia. And it's a hundred per cent owned by Magnetite Mines. Within these tenements, our flagship Razorback project is the current focus. For perspective, our stage one development plans for Razorback focus on just 8 per cent of that resource, which is based entirely off our declared main reserve of some 500 million tonnes.

Razorback has many unique geographical advantages, which allow for, importantly, a low-capital staged development. The resource outcrops allowing for minimal stripping, and the project is located close to heavy rail and existing iron ore ports. High-voltage grid power is available, connecting to the main south-east Australian grid, with significant renewable energy component currently over 70 per cent and going higher.

We recently completed our PFS study, which optimised the project configuration around a comparatively low and competitive capital cost. Our stage one development is a planned capacity of around 3 million tonnes per annum of high-grade iron ore concentrate with a capital cost of around US$500 million. And we believe our top-down capitally-driven carefully-managed approach gives us the greatest chance of development success.

The project will produce a premium high-grade iron ore concentrate at around 68 per cent iron, and we believe as general iron ore grades and steel mills face pressure to decarbonise, the premium Razorback product will be in demand.

ESG credentials are very important, as you know, for resource projects, and we are well positioned to target a low-emissions footprint for our operations and products with a higher-grade product helping steel mill customers in reducing emissions.

We're well funded, and we've moved directly into the definitive feasibility study for the project, which will take us to decision to mine, with plans for first ore on ship in late 2024.

Lauren Evans: Thanks, Peter. So now, Mark, turning to your Razorback iron ore project in more detail, can you tell us more about this?

Mark Eames: Well, Pete's given us an excellent overview of the project, and I'd like to just focus in on one or two specific aspects.

As Pete said, Razorback's a large iron ore resource, located close to existing infrastructure, but probably the key elements I'd highlight is it produces a particularly high-grade product, which is in demand, and it does that with attractive economics. High product grades are important in the iron ore market because it allows steel mills to optimise their blast furnace burden, reducing costs and decreasing pollution.

Longer term, most observers expect that, as steel technology changes to reduce the emissions footprint, increasingly the market is going to demand greater and greater quantities of higher-grade ore, for which the Razorback project is particularly well suited to fulfil.

Our approach is to start relatively small with a staged development and, once we get started, to grow the business to match that developing market.

If we turn to the geology, the key thing I'd highlight about the geology, as Pete says, we've got particularly large resources. We're using a relatively small proportion of resources to generate the results in the prefeasibility study, but importantly, all of our resources are JORC-compliant, and our PFS is based 100 per cent on a JORC-compliant reserve.

If we move to infrastructure, another key attribute of the project, we're well placed in terms of accessing existing infrastructure. We've got an open-access heavy-freight rail line located approximately 50km from the project, which we'll use to ship the product to port. In terms of ports, we have a number of choices open to us, and the port we've selected in the prefeasibility study is Whyalla, which is an existing iron ore exporting facility.

In terms of sustainability, Pete's already mentioned, we've got the advantage of access to the main south-east Australian grid, which gives us volumes of highly competitive power combined with attractive ESG credentials.

And then, last but not least, the region we're operating in is very supportive of mining. We've had a case manager appointed by the South Australian government to help us with the approvals process, and we operate in low-intensity pastoral country, with our nearest neighbor about 15km away.

And in terms of the overall positioning of the project, with a processed iron ore operation, success comes from a thorough understanding of the technical attributes of the resource and the processing flow sheet that's selected. We've done a lot of work with our engineers, Hatch, and the process we're using is principally magnetic separation, which is a well-understood and effective way of separating high-grade products in these type of resources.

Lauren Evans: So, now to your project economics, finances and approvals, what are the key metrics?

Mark Eames: Our recently completed prefeasibility study shows that the project is not only technically robust, but also economically attractive. At long-run iron ore prices, the prefeasibility study generated after-tax ungeared rates of return of about 20 per cent, and today's iron ore prices are well above the level we used in the study.

Our first stage, as Pete's indicated, is deliberately small to support an entry into the rapidly developing marketplace, and what's exciting is our initial capital is relatively small, at about US$500 billion for the first stage of approximately 3 million tonnes of output. At that level, we have an exceedingly long life with plenty of potential for attractive expansions in future.

But financial results are not the only important characteristic of a mining project these days. ESG credentials are central to everything we do. We're building in strong ESG processes in everything we do, and, with a naturally high-grade product, we have particular ESG advantages in terms of downstream utilisation of the product.

Lauren Evans: So, Mark, what's taking place and what are the key milestones for the project?

Mark Eames: Well, I'm glad you asked that, Lauren. We've got a lot going on at the moment. So, the first piece is we've actually started the formal definitive feasibility study for the project, which is the key step leading to a decision to mine and then into construction. The definitive feasibility study is well underway. We've appointed key engineers and the work programs are advancing well.

The second thing we're doing is we've got an extensive drilling program just about to commence. That's going to look at delineating the resource with infield drilling, recovering metallurgical sample for further test work and doing some pump test work to assess the groundwater resource.

In parallel with that work on the first stage of the Razorback project, we're also doing a scoping study into expansion options in parallel with the definitive feasibility study into stage one. Those expansion options are going to help us delineate the future pathway for the project and ensure that we build the project with expansions in mind, so that we are going to be readily able to expand the project as the market develops.

And, as Pete says, one of the key things we're working on is finance. We're looking to move to financial close for the project at the end of next year.

Lauren Evans: Now back to you, Peter. Is there anything else you'd like to add today before we wrap up?

Peter Schubert: Lauren, I think that Mark's covered it very well. I mean, we've got a very long-life iron ore project, with expansion optionality, in a tier one mining jurisdiction -- that's a bit unusual in itself -- that will produce a superior iron ore product sought by steel makers globally. South Australia's leading the renewable energy charge, so we stand to be direct beneficiaries of that, and that's pretty important in 2021. But key for me is the low initial capital that’s realistically fundable as we move closer to decision to mine.

Lauren Evans: Well, Peter Schubert and Mark Eames, thanks so much for the introduction today, and we look forward to hearing from you again later in the year.

Peter Schubert: Thanks, Lauren.

Mark Eames: Thanks, Lauren.


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