Aim-listed exploration and development company Ferrex hopes to at least double the inferred resource – 139-million tonnes at 37% iron – of its Mpumalanga-based Malelane iron-ore project with the second drilling programme, due to start in August, says Ferrex MD Dave Reeves.

He tells Mining Weekly the new drilling programme will run for two months, adding, however, that the company still needs to finalise access agreements for the project.

The programme will be centred on an old ochre mine, about 6.5 km east of the previous drilling area, where there is potential enrichment of the banded iron horizon. Results will be used in ongoing studies to allow for flexibility in the mining permit submission.

Once this drilling programme has been completed, Ferrex will model the resource and adjust the scoping study. Reeves notes that the company plans to submit the mining licence application later this year or in early 2015 and expects the project’s prefeasibility studies to be completed in 2015.

While Ferrex envisages that the project will become a conventional openpit mine, with an initial 1.8-million-tonne operation at 57% iron and a life-of-mine of more than 16 years, Reeves tells Mining Weekly there is no definite date for construction or first production.

“Nevertheless, Ferrex believes there are opportunities for the material to be used regionally in the future and not for all of it to be exported to China, owing to logistics costs and the loss of value associated with exports,” Reeves says.

Ferrex also believes that iron-ore will reach a long-term price of $100/t to $110/t, despite the last month’s drop in price to below $100/t. Reeves expects a positive future because, despite the company not foreseeing a return in high iron-ore prices, it believes it can generate sufficient revenue amid the estimated prices.

Ferrex chairperson Brian Moritz told Mining Weekly in March that, at the current estimated production rates, the Malelane project had a net present value of $523-million at a discount rate of 10% and a 72% internal rate of return.

Further, owing to its capital cost and capital intensity of $77/t, the project is placed in the lowest quartile for capital intensity of new iron-ore projects worldwide.

While Reeves believes iron-ore mining potential in South Africa is becoming more limited, as most of the deposits are known and some of the country’s infrastructure has reached its full capacity and needs to be developed further, he maintains that the Malelane iron-ore project is situated in an “excellent location”, as it has access to logistics.

He also highlights an established skills and industrial base as another advantage of investing in a South African iron-ore project.

West Africa Prospects
Reeves notes that Ferrex has similar plans for the Mebaga iron-ore project in Gabon, West Africa, and the company is focusing significantly on this project.

In January last year, the company secured an 82% holding in the 309 km² high-grade Mebaga direct shipping ore (DSO) iron-ore deposit.

Ferrex completed the mapping and sampling studies from its initial drilling programme at the Mebaga iron-ore project and released the results in March this year, noting that it had found an additional area of high-grade mineralisation. Reeves stresses that “there is a lot more to be found”, based on the results of the sample studies.

Therefore, drill contractors employed by Ferrex are preparing for mobilisation to hopefully undertake more drilling this year.

“Drilling will be designed to test along strike and down dip of the mineralisation identified in the Phase 1 drill campaign and to test some of the additional targets defined during mapping. This programme will enable Ferrex to better understand the potential of the Mebaga licence to host a significant DSO iron-ore deposit.”

Ferrex reports that Mebaga is the nearest DSO iron-ore project to the Atlantic Ocean in Africa and can either transport ore using an existing rail line that spans 200 km to the Port of Qwendo, in Gabon, which currently exports 3.5-million tonnes a year of manganese concentrate, or it can barge the ore 300 km along the Oougue river to the Port of Gentil, also in Gabon.

Reeves concludes that, owing to infrastructure accessibility, “the project is quite different from most West African iron-ore projects that haven’t been developed and potentially has a low-cost capital path to production”.