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The Advertiser: Green steel partners, then ore systems go

5 March 2024


By Cameron England

With the world increasingly looking to decarbonise its steel production, the proponents of a potentially two billion-dollar plus iron ore project in South Australia argue their time has come.

There has been talk, off and on, for many years, about the potential of SA’s Braemar region, about 300km north east of Adelaide, to host a major iron ore export operation.

But with the capital costs for iron ore large, and miners in the past generally focused on hematite iron ore for direct export from regions such as the Pilbara, the various projects in the Braemar never managed to get off the ground.

Magnetite Mines, headed up by managing director Tim Dobson, believes that may be about to change.

The Adelaide-based company has an iron ore resource of six billion tonnes at its Razorback deposit in SA – two billion in the higher confidence reserves category – and is looking for partners to help fund a definitive feasibility study into the project.

It’s not the first time the project has been raised as a potential major exporter of iron ore.

But, Mr Dobson says, there have been some key shifts in the economic and business landscape which have made the story more compelling.

Take Professor Ross Garnaut’s recent speech at the National Press Club, where the noted economist – and renewable every company director – argued that the onshore processing of Australia’s minerals, powered by green hydrogen, would be a game changer.

SA is aiming to be a major hydrogen producer, with the state government aiming to develop what would be the world’s largest electrolyser at Whyalla in coming years.

Many pundits, including Garnaut, argue that given the difficulties and high costs associated with exporting hydrogen, using the energy source to process goods onshore is where the real value lies.

That’s where magnetite comes in. This form of iron ore is suited for use in electric arc furnaces, which the steelmaking industry will increasingly need to turn to – and away from coal – if the hopes of greening the industry are to be realised.

GFG Alliance’s Whyalla steel operations are already planning to install a new EAF, and in January received $63m in federal funding to help make it a reality.

Magnetite Mines therefore is keen to position itself as an exporter of initially concentrate and later pelletised iron ore to overseas producers looking to go electric in their steelmaking, as well as potentially feeding local steel producers.

Mr Dobson said usually a company would complete its DFS and then take a fundable project to market, but Magnetite Mines is looking to engage a partner at this earlier stage.

“I sensed the competitive tension was building around the green iron thematic, and that we might be able to pull in partners ahead of time based on a bit of FOMO, and that’s proven to be the case,’’ Mr Dobson told The Australian.

“We’ve been talking to a lot of players in the steel industry in the region.

“We’re able to pick and choose who we want to take forward and there’s three potential partners now that we’ve gone deeper into due diligence with.’’

Finalising that process of locking in a partner will be a key milestone for the company, which will then aim to finish an updated DFS.

Mr Dobson said the company had done a lot of work with the local native title group and the state government, who were supportive of the project, and getting the federal government to understand the significance of the project was also on the agenda.

“I see massive opportunity for where the government is moving its thematic rapidly now to be able to support projects such as ours,’’ Mr Dobson said.

The company is on the cusp of submitting its mining lease proposal and is working on land access with native title holders and pastoralists.

“In my ideal world, the DFS will come on the back of securing a strategic partner or more than one,’’ Mr Dobson said.

“And they will actually help provide the funding towards that, that we can combine with shareholder funding to complete that work.’’

The base case for stage one of the project involves a mining operation, hauling iron ore by road to the nearby rail line for export through most likely Port Pirie.

The initial operation would process 30 million tonnes of ore annually into five million tonnes of concentrate.

“This project will be somewhere around $US1.5bn to build that stage one, most of that money will go into the plant and then what we call non-process infrastructure,’’ Mr Dobson said.

The rail line is just 50km from the mine site, which was “a godsend” Mr Dobson said.

Given the large capital costs, iron ore projects are by their nature all or nothing operations.

It’s not like you can set up a small operation to generate early cash flow.

But Mr Dobson said the momentum is building on the green iron front, with governments realising that the export of hydrogen was “extremely inefficient’’.

“You can lose up to 50 per cent of the energy you put into hydrogen before the end user gets to put it into their plan,’’ he said.

“So all of a sudden, it’s ‘let’s use the hydrogen at the source (and) get the biggest bang for our buck in carbon reduction, and sell an embodied renewable energy product, which we just call green iron’.

“This has only happened in the last 12 to 18 months.

“That answers your question of why now – we’re seeing Japanese Korean and Taiwanese, Chinese, Indian steelmakers are looking around for places where green iron can be made and imported from.

“It’s where there’s coincident renewable energy and magnetite resources.’’

Mr Dobson said the pull was even coming from further downstream, with end users such as automakers looking to decarbonise their supply chains and looking for greener steel options.

“They’re prepared to pay a premium for the product. At the same time, as the carbon intensive steelmaking is getting more expensive – when those two come together then green steel is competitive. We’re seeing both of those happening already.’’

Mr Dobson said from a state perspective, the project offered a potential economic boon to an area which was economically depressed.

“We can create a growth engine that’s actually quite transformational,’’ he said.

“With the world increasingly looking to decarbonise its steel production, the proponents of a potentially $2bn-plus iron ore project in South Australia argue their time has come.”

Full article: Magnetite Mines (ASX:MGT) talks up SA iron ore aspirations | The Australian

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