- Australia's Carpentaria eyes new iron ore mine
- Says rich ore makes it competitive in a soft market
- Bahrain Steel, Mitsubishi, Gunvor agree to take 3 mln/t a year
As most of the world's small iron ore miners fight for survival, an Australian prospector is preparing to dig a new mine - counting on its high-grade ore and specialist mill buyers to compete in market dominated by mega producers.
Quentin Hill, managing director of Carpentaria Exploration (CAP), says his company's "super grade" concentrate represents some of the world's richest iron ore pellet feeds, which can yield margins competitive with Vale
, Rio Tinto (RIO), BHP Billiton (BHP) and Fortescue Metals Group (FMG), which together control 70 percent of the sea-borne market. Bahrain Steel has signed a non-binding letter of intent with Carpentaria for three million tonnes a year, while Mitsubishi Corp <8058.T> and commodities trader Gunvor Group have agreed to buy a further 1 million tonnes each.
That leaves about 4.5 million tonnes of annual production still to be marketed, according to Hill.
While Carpentaria corrals new customers, blueprints for new mines from Australia to Guinea are being abandoned, as iron ore topples from highs near $200 a tonne four years ago to less than $50 today. Goldman Sachs forecasts iron ore at $46 a tonne this year and $35 in the next two years.
"It's safe to say that iron ore is not the flavour of the month," said Keith Goode, an analyst at Eagle Mining Research. "Those high prices aren't coming back."
Iron ore has become symbolic of mining booms gone bust in Australia and Brazil, where most of the 1.5 billion tonnes of sea-traded material comes from each year.
Sam Walsh, chief executive of Rio Tinto, which posted an $866 million loss in 2015 despite boasting the world's lowest production costs, recently warned that iron ore was not for the faint-hearted and that smaller miners were only "hanging on by their fingernails."
Buyers ultimately determine which independent projects get developed, Hill said, based on the quality of the ore and an ability to operate at a low cost to ride out price cycles.
"For us, this is being demonstrated by the recent non-binding letters of intent that show the strength of international interest for our project," he said.
Carpentaria's "soft rock" is different from other harder magnetite ores, which allows a very different approach to the typical iron ore mining and processing challenges.
"The soft rock enables simple liberation of a super grade magnetite product without complex and expensive processing methods," Hill said, referring to the grade of ore.
Carpentaria has set a goal of first production by 2020, supplying its high-grade product with an iron content of 70 percent mostly to electric arc furnace steel mills, known as mini-mills.
Mini mills manufacture steel from scrap mixed with pellets - concentrated balls of iron - alleviating the need for the large tonnages of iron ore supplied to traditional blast oven furnaces.
Hill is canvassing steel mills and trading houses, with an eye on the Middle East and Asia.
Most of the Middle East's forecast 69.5 million tonnes of steel production next year will come from mini mills, thanks to an abundance of natural gas making them cheap to run.
In China, forecasters for the Organization for Economic Cooperation and Development see the mini mills' share of the nearly 1 billion-tonne-per-year market increasing.
