PERTH (miningweekly.com) – ASX-listed Mineral Resources (MinRes) on Monday announced a $3-billion final investment decision for the Red Hill iron joint venture (RHIOJV), which forms part of its Ashburton hub development.

MinRes holds a 40% interest in the RHIOJV, while API Management (APIM), on behalf of the Australia Premium Iron JV, consisting of Aquila Steel and AMCI, holds the remaining interest.

Stage 1 of the Onslow iron project will consist of the RHIOJV tenements which host mineral resources of 820-million tonnes and 537-million tonnes in ore reserves. The Onslow project would be one of the largest iron-ore developments undertaken in Western Australia, with the Stage 1 operation to deliver at a rate of 35-million tonnes a year.

Total capital expenditure for the project has been estimated at $3-billion, representing a capital intensity of $65/t capacity. The free-on-board operating cost is expected to reach $32.23/t, with MinRes to charge RHIOJV an infrastructure capital charge of $7.74/t.

Under the agreed binding project development term sheet MinRes will continue to act as manager of the RHIOJV, and will earn an additional 17% participating interest in the RHIOJV in exchange for funding RHIOJV capital expenditure of $1.3-billion by way of a carried expenditure loan until commercial production.

The carried expenditure loan will attract interest at the rate of BBSW plus 2.9% per annum and will be repaid from 80% of APIM’s pre-tax free cash flow from the project.

MinRes’ direct ownership at commercial production will be 57%, plus MinRes will have a further 3.3% interest held indirectly through MinRes’ existing 15% shareholding in Aquila’s parent entity, Aquila Resources, resulting in a total effective ownership interest of 60.3%.

MinRes will also fund, build, own and operate all the infrastructure outside the mine including private haul road and port infrastructure at the Port of Ashburton.

Additionally, the RHIOJV will appoint wholly owned subsidiaries of MinRes to undertake the engineering, procurement, construction and commissioning of all fixed plant, civil and earthwork and processing and non-processing infrastructure at the mine under a fixed price contract, and to build, own and operate a crushing plant under a life-of-mine crushing services agreement. MinRes subsidiaries would also be used to provide haulage, port and transhipping services to facilitate export under a life-of-mine service agreement.

MinRes will sell 50% of its share of the product to Baosteel, with Baosteel having the option to take a further 25% of the product under a life-of-mine agreement.

“I’m delighted that our flagship Onslow iron project has reached this significant milestone. Achieving final investment from all joint venture partners is a testimony to the project’s credentials and demonstrates the high level of confidence all parties have in this project, which is set to redefine mining in Western Australia,” said MinRes MD Chris Ellison.

“Onslow Iron introduces a low-cost, long-life and low-risk operation to MinRes’ iron-ore portfolio, along with the largest mining services contract in Australia. The successful delivery of the project is underpinned by MinRes’ mining services innovations, which make the project economics compelling through commodity price cycles and allow us to future proof the business against low iron ore prices.”

Ellison said that project preparations were on track; early works had commenced and long-lead items had been ordered in line with the project schedule.

“We look forward to maintaining the momentum as we enter the construction phase, as we aim to meet our target of delivering first ore on ship by December 2023.

“We look forward to delivering solid returns for our joint venture partners and shareholders, creating thousands of jobs, injecting billions of dollars in the economy and working with the Traditional Owners, the Thalanyji people and the Robe River Kuruma people, pastoralists, and the wider community, to provide them with long-term benefits and economic opportunities.”

Meanwhile, MinRes on Monday also reported financial results for a challenging 2022 financial year, with revenues down by 8% on the 2021 figures, to A$3.4-billion, while underlying earnings before interest, taxes, depreciation and amortisation were down 46% to A$1.02-billion.

Underlying net profits after tax were also down 64% on the 2021 figures, to A$400-million, while operating cash flows were down 79%, to A$344-million.

The company told shareholders that earnings were negatively impacted in the first half by a steep decline in iron-ore prices and widening of discounts, both of which stabilised in the second half. With record lithium prices, first earnings from conversion of Mt Marion spodumene concentrate into lithium hydroxide and record growth in the Mining Services division, the company delivered a strong second-half performance.

Despite challenging conditions in the iron-ore market, including the sharpest fall in iron-ore price in history, MinRes shipped a record 19.2-million tonnes in the 2022 financial year.

In lithium, MinRes and the company’s JV partner Ganfeng approved the next stage of expansion of Mt Marion, to 900 000 t/y. MinRes also delivered maiden earnings from lithium hydroxide production, a first for an ASX-listed company.

Spodumene concentrate production has resumed at Wodgina, one of the world’s largest hard-rock lithium mines, following the start-up of Trains 1 and 2. The Kemerton lithium hydroxide plant, which like Wodgina is part of the MARBL JV with Albemarle, is in the final stages of pre-production activities.

MinRes and Albemarle continue to work on a restructure and expansion of the MARBL JV to better align operational capabilities, the company said on Monday.

“Against the headwinds of iron-ore price and inflationary cost pressures and the pandemic still affecting our everyday operations, we achieved the second-best financial performance in our history while investing in major development projects that will set us up for the next 30 to 50 years,” Ellison said.

“I am incredibly proud of what our team has delivered. Most importantly, we achieved this result in a safe and sustainable way while protecting the physical and mental well-being of our people.

“During the year, we successfully restructured the company into four operating pillars; Mining Services, Iron Ore, Lithium and Energy, that each have significant long-term growth prospects and will operate as separate businesses drawing on MinRes’ centralised services. This is an important development which will allow us to better capture the enormous potential that we have built into MinRes, none more so than in the lithium space.”