No stone un­turned in search frenzy

The Weekend Australian - Review - - Steel -

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

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