No stone unturned in search frenzy
D ISCOVERED in 1901, finally being explored in 2008 — the Nowa Nowa deposit in Victoria is another sign that every part of Australia is being scoured to find iron ore . . . any iron ore.
The booming steel industry has put pressure on iron ore producers as never before, around the globe. Of all the parts of Australia, Victoria is the last you would think of if it came to talking about iron ore potential. But junior Gulf Mines has taken an option over the 100sqkm Nowa Nowa project just north of Lakes Entrance.
The deposit was reported in 1901 by the Victorian Geological Survey and there were thoughts of building a new industry using the vast brown coal resources nearby. The plan never went further and all that iron ore — however much there is — remains in the ground.
Exploration is still at an early stage, but Gulf in April was feeling confident enough to report that it believed there could be as much as 50 million tonnes of iron ore at the project.
Iron ore projects that have long been known about are being re- evaluated all over the world. Small North American companies are looking at lower- grade deposits in Alaska, Arizona, Missouri, Nevada, New Mexico an Utah.
But there are also some very big projects now being explored or sought.
Big or small, investors are quick to jump on any project that starts to emerge as promising. Sinosteel hit the headlines for its attempted takeover of Midwest Corp and its iron ore inland from Geraldton, and other Chinese companies have taken equity in either emerging Australian companies or their projects.
At the other end, late last month a Bahrain company moved to 8.8 per cent of United Minerals Corp, a junior that has some strategic ground, good drill results and proximity to an existing railway in the Pilbara.
And small companies are now able to raise amounts of capital that, just five years ago, would have been unthinkable. Atlas Iron has raised $ 100 million for its project 75km from Port Hedland; encouraged by that, Brockman Resources announced its own $ 112.5 million book build for its Marillana project in the Pilbara. At a time when many other initial public offerings have been struggling, South Australia’s Iron Road closed its float heavily oversubscribed in late May.
The Pilbara mines still dominate Australian output of iron ore, and will continue to do so, more so with the start- up of Fortescue Metals Group’s big Cloud Break mine and newly built railway to Port Hedland. Alongside the giants, any spare parts of the Pilbara have been snapped up and pegged by junior explorers, the numbers of which increase weekly.
In 2006, 98 per cent Australia’s iron ore output came from the Pilbara.
It is going to get even bigger. CITIC Pacific is spending $ 5.2 billion to build its Sino project near Cape Preston which will produce 27 million tonnes a year of iron pellets and concentrates. Rio Tinto is outlaying $ 1.7 billion on its Brockman 4 iron ore mine ( 22 million tonnes a year building to 36 million) and another $ 1 billion on Mesa A to add a further 25 million tonnes to its Australian iron ore capacity.
For all the dominance of the Pilbara, however, the past few years have seen exploration companies fan out across the continent. As a result, regions such as the Mid West of Western Australia, the Eyre Peninsula in Western Australia and parts of Tasmania are now subject to intensive exploration and drilling programs.
But not just exploration. Outside the Pilbara, there are several other areas that already have established iron ore mines. Among them: in Western Aus- tralia, Koolyanobbing, Cockatoo Island, Koolan Islands and parts of the Mid West region; in the Northern Territory, the old Frances Creek mine is now back in action and producing sufficient iron ore to justify a daily train from its siding to the port at Darwin; in Tasmania, there is the Savage River mine which is now Chinese- owned.
The Australian Bureau of Agricultural and Resource Economics has projected that Australia’s iron ore production will rise from 248 million tonnes in 2006 to 441 million tonnes by 2012, of which 405 million tonnes will be exported. On the global scene, the search for iron ore is no less frenetic. Sinosteel has acquired exploration ground in Cameroon ( where Australia’s Sundance Resources has its Mbalam iron ore project).
Rio Tinto is developing the $ US6 billion Simandou project in the West African state of Guinea; also in that country, junior Lindian Resources is also applying for a greenfields iron ore project in that country. ( In an even more ambitious move, small Australian oil hunter Black Fire Energy has acquired iron ore ground in Nigeria.)
Indian steel maker Ispat Industries is buying into a Brazilian mine, ArcelorMittal is working to rehabilitate a mine in Liberia while Xstrata is looking for an entry point into iron ore to further diversify its operations. Now India’s JSW Steel has signalled it will spend $ US500 million to lift production at its Chilean mine, and a new mine is now under development in China’s Shanxi province which will add 22 million tonnes a year to that country’s output.
But one of the biggest prizes has fallen into the lap of Jindal Steel & Power of India. It has been chosen by the Bolivian Government to develop the enormous El Mutun deposit — 40 billion tonnes.
Notwithstanding the challenges of finding gas to power the mine and then transporting the ore from the remote forest region near the Paraguayan border, this was a concession sought by several companies.
The iron here has been known since 1845. It is only in this remarkable commodities boom that this iron ore is now needed — and feasible to mine. Disclosure: The author owns shares in Rio Tinto