While there is no doubt that the iron-ore industry’s operating conditions have been challenging, Australian iron-ore miner Iron Road believes that the long-term industry fundamentals are sound and that its new Central Eyre Iron Project (CEIP) is well placed to weather near-term cyclical weakness.
Iron Road MD Andrew Stocks highlights that the iron-ore market is not a single market but, instead, a complex sector made up of various iron-ore products of varying quality and characteristics. Each of these products exhibit their own supply and demand dynamic, he explains, adding that it is worth considering these alongside the overall imbalance between supply and demand at a macro level.

In particular, there is an emerging preference for higher-quality, lower emissions producing iron-ore products, such as that which will be produced by Iron Road’s CEIP on the Eyre Peninsula, in South Australia.

“The CEIP’s iron-ore will attract a pricing premium, owing to its higher quality and lower emissions, and combined with our competitive production costs, we are well positioned to weather cyclical weakness in the iron-ore price,” Stocks says. He stresses that the project’s iron-ore is particularly beneficial for assisting the steel industry in meeting stricter emissions standards, and, subsequently, reducing operating costs.

Stocks highlights that, taking action to enhance efficiencies across operations is critical, as is targeting reductions in both capital and operating costs. “This is true of operations across the world when talking iron-ore. “Whether in South Africa, South Australia or anywhere else, improvements in infrastructure are always front of mind,” he explains.

Iron Road’s CEIP is a long-life proposal, which will produce a high-grade, low-impurity iron concentrate for export to Asia. The project includes the development of an iron-ore mine, port and rail. The proposed mine site is 28 km south-east of the regional centre of Wudinna and the proposed port is 7 km south of Port Neill at Cape Hardy. The mine and the port are expected to be linked by an infrastructure corridor comprising rail, water and power.

The estimated output of CEIP is over 20-million tons a year of 67% premium ore concentrate over more than 25 years. With a competitive projected operating cost, the iron concentrate is well positioned to actively displace lower-quality iron-ore as market evolution occurs, says Stocks.

Iron Road will work with a number of partners on the project and has formed a strategic cooperation agreement with Chinese construction company China Railway Group and a tripartite agreement with China Railway Group and steel producer ShanSteel. The iron-ore miner has also signed a memorandum of understanding (MoU) with grain trader Emerald Grain regarding the proposed development of the port. Iron Road has also signed an infrastructure funding MoU with Australian proprietary company AIXI Investments and is working closely with its major shareholder, investment firm Sentient.

Iron Road is currently finalising CEIP’s construction and operations strategy, which includes a package of bankable construction contracts for the project with China Railway Group and agreed third parties. “We are working towards executing long-term iron concentrate sales contracts, securing government approvals and finalising debt and equity finance. We are currently working towards achieving a final investment decision within the next year,” Stocks points out.

He highlights that the CEIP has the largest magnetite ore reserve in Australia and is among the largest reserves globally. “This project is a major mining and infrastructure development and will become a significant contributor to the South Australian economy.”

Mining Weekly reported in June that Iron Road had announced its intention to raise at least $9.23-million from an entitlement offer and institutional placements to advance the CEIP to a final investment decision. The company announced a one for nine renounceable entitlement offer of new shares at $0.10 a share and said it would conduct a $1.05-million institutional placement to certain institutional shareholders, as well as, subject to shareholder approval, a $3.75-million institutional placement to Sentient.

Stocks states that the company is committed to maintaining development momentum through the iron-ore price cycle and that there is scope to further reduce costs at both capital expenditure and operational expenditure levels. In April, Iron Road announced a programme to lower the project’s capital expenditure by $600-million to $3.4-billion.