TORONTO (miningweekly.com) – TSX-V-listed Iberian Minerals has illustrated its ability to move forward despite the strong headwinds currently being faced by iron-ore producers.

The Alberta-based iron-ore development company owns the Cehegin project, in Murcia, south-eastern Spain, which has garnered the attention of diversified miner Glencore, and forges on with development amidst low-cost oversupply, an overhang in steel inventories and, at the macro level, weakened Chinese manufacturing data.

Iberian head of corporate development and interim CFO Rick Gliege told Mining Weekly Online in an interview that the quality of Cehegin’s potential output would be its critical selling point.

In the iron-ore development space, only projects, such as Cehegin, deemed to have a premium product or the potential for the lowest of operating costs had retained the market’s interest. Even then, the pace of development had slowed as companies tried to strike the right balance between necessary advances versus the need to make strategic savings.

Iron-ore producers also continued to batten down the hatches while many medium- or small-scale iron-ore projects had also been mothballed, shuttered or divested, while few commentators had been positive about the commodity’s immediate price prospects.

GETTING GOOD GRADE
Iberian's Cehegin project comprised a past-producing iron-ore mine and was composed of 62 concessions for just over 1 000 ha. It came with 38 000 m of borehole results and a wealth of historical production data stretching from the 1960s to the 1980s.

The mine averaged grades of more than 65% iron until 1985, which meant its material could carry a premium of over 62% iron fines. The material was also noted for a reduced level of impurities.

“The abundance of cheap material between 56% iron and 62% iron shouldn’t displace the premium grade that Cehegin is capable of producing,” Gliege emphasised, noting that high-grade material still had demand attached to it.

The demand related to high-grade iron-ore’s added efficiency in the steelmaking process and that it was often used as a mix to improve the quality of low-grade feed.

Fewer impurities meant fewer pollutants emitted from the blast furnaces. This was an important consideration for the European market, which continued to witness reduced or capped emissions levels on heavy industry, including steelmaking. By comparison, China had just started its journey towards emissions reductions and greater demand for high-grade iron-ore could stem from this.

A National Resource 43-101 technical report for Cehegin was filed in May 2014, which noted that the historical data supported estimated mineralisation of between 25-million tonnes and 30-million tonnes. In addition, it stated that the project’s logistical strengths, including a deep seaport 115 km away, a nearby toll-free highway, and a railhead just 12 km away,  could connect the project to the wider European network.

TAG TEAM
A big coup for Iberian came in 2013 when Cehegin caught the attention of mining multinational and trading house Glencore, which entered into a cooperative agreement with the company in October 2013. This evolved into a definitive joint venture (JV) that was announced in June 2014, with an 80:20 spilt between Iberian and Glencore, respectively. 

The JV was still in effect, although Gliege explained that Iberian had sufficient funds to complete the company’s upcoming work programme without a 20% contribution from Glencore. He added that Iberian had entered into discussions to acquire 100% of the project while maintaining the offtake deal with Glencore.

“There are huge advantages of having Glencore on board – there’s no question of that,” Gliege said. “We won’t have to concern ourselves with the sale of production as the agreement calls for Glencore to buy all iron-ore production that meets [its] specifications.”

Cehegin was still in its first phase of development, with a high-resolution aerial magnetic survey across the concessions just completed. The objective had been to confirm and define the extent of several previously compiled targets. “The aerial magnetic survey provides excellent resolution for the showing of near-surface magnetic sources and represents a major improvement over the previous aerial magnetic data we had,” Gliege advised.

Another objective would be to bring magnetic anomalies noted outside Iberian’s concessions under the company’s auspices, with Gliege saying this could increase the project’s territory to about 6 900 ha. The aerial magnetic survey would be used as supporting data in applications for exploration permits.

In the meantime, the company would use the magnetic data alongside its other modelling to select drill targets for the upcoming 2015 work programme. This would involve around 15 to 18 boreholes for about 2 200 m, with around two holes at each location.

Phase 2 would take the project into the prefeasibility stage during 2016, whereby another 10 000 m of drilling would be undertaken with the goal of outlining an initial mineral resource. The cost was estimated at $2-million and would also involve metallurgical studies, as well as mine and processing plant design work.

GOING FOR GOLD
Away from Cehegin, Iberian recently acquired the Caurio project within the Rio Narcea Gold Belt, in Asturias, northern Spain. This was a region with a gold mining heritage stretching back to Roman times. The Caurio project covered 3 413 ha and was located near Orvana Mineral’s Oro Valle/El Valle gold mine.

Like Cehegin, the company inherited a wealth of historical data, including 9 000 m of core samples available for analysis and information from historic geological logs and airborne surveys. The company’s near-term objectives at Caurio would be to determine short- and medium-term targets for exploration.

The project came with a three-year option agreement for Iberian, granting it flexibility for the future. “We’re excited about the project,” Gliege said. “And we like gold. It’s a commodity closely followed by many in the resource investment community. It’s a commodity everyone understands. It’s the go-to metal.”

Iberian was also bullish about Europe’s economic performance, which, away from Greece, had undergone a slow but steady recovery. This included Spain. “Spain is on the road to economic recovery and is now ranked the fourth-best performing country within the European Union. Its growth rate is currently 3.1%,” Gliege pointed out. “The local and national governments have been supportive and it’s a great jurisdiction in which to conduct exploration.”