US project has the right stuffMichael Quinn, 6 October 2010ALL...

US project has the right stuff
Michael Quinn, 6 October 2010

ALL magnetite projects are not the same! Just ask Richmond Mining, which claims its Buena Vista iron ore deposit in Nevada has significant geology and infrastructure advantages over its peers in Australia. Raw numbers to buttress the case are due later this month.

On geology, the pertinent point is this, according to Richmonds managing director Max Nind: As soon as you mention magnetite, everyone immediately thinks of the stuff in Western Australia ... the stuff that is harder than steel. This is in a different form. The stuff in Australia is a sedimentary magnetite that was laid down on the sea floor and compacted over the years, becoming silicified.

This is magmatic, so it is volcanic ... so you have a big blog of magnetic mineralisation sitting there that is easy to upgrade. In WA you have to basically crush the whole lot, grind it (right down) and then typically undertake more processing. With Buena Vista we can reject quite a lot of it at the crushing stage because of the geology. The silica that is with it is with the country rock and the country rock is non-magnetic. So (easily) separated. Simple grind, magnetic separation very simple stuff.

In addition, the test work across all of the samples is said to have demonstrated that the magnetite ore at Buena Vista has a low Rod and Ball Mill work index, indicating the potential for lower energy consumption during the beneficiation process.

Nind told HighGrade this week that with so much metallurgical testwork carried out by former project owner US Steel back in the 1960s and early 70s, a lot of Richmonds testwork was merely confirmatory. And Richmond was getting superior results in a vastly different iron ore pricing environment, he said.

The big bonus for Richmond is that Buena Vista is 40km from the Southern Pacific Railway, that heads down to three different ports in the San Francisco area under consideration. Because of these advantages, Nind believes a project costing between $US50 and $US150 million is on the cards. He was reticent at this early stage to narrow the range and wouldnt be drawn on operating costs.

Weve spoken to a lot of the service providers and theyve given us their first pass numbers and weve now gone back to get their second pass numbers because when you first go and see these guys they dont really think you are for real, he said.

We not were not going to be $US20/t like Rio and BHP, and we know were not going to be $US100/t because otherwise we wouldnt be doing it. So well be a lot lower than that too. We need to push the costs down as much as we can. Having said that were still pretty comfortable with the way costs are heading in terms of getting them down.

Were hoping to have something out by the end of the month.

Were looking at producing 1-1.5Mtpa of magnetite concentrate. Now that doesnt sound much in the scheme of things, but the thing is you are not trying to displace some of the bigger guys so actually going out and finding a home for this stuff at the sort of grade we can potentially produce isnt going to be a problem.

It really comes down to what the customer wants in terms of (concentrate) grade.

People say the grade is too low. But so what? If you can produce a magnetite concentrate easily and cheaply thats going plus-64, 65, 66% iron, who cares?

It is worth bearing in mind that the standard 62% fines product was this week fetching $US139/t, while Richmond had a market capitalisation of less than $A15 million.

Nind added that the company continued to look for project killers but had yet to find any, with permitting another area where no problems are expected the majority of the deposits at the project are held under patented claims over private land where there is a history of mining.

Richmonds acquisition of the multi-hundred million tonne Buena Vista opportunity on a continent where Canadians operate multiple magnetite operations was a function of a number of factors.

Nind indicated the headline grade immediately scares off most, with closer assessment of the major data set generated by US Steel needed to reveal higher grade areas and the inherent positive metallurgical characteristics. He also indicated the vendor had high price expectations.

Somewhat surprisingly, Nind maintains the US is a country awash with opportunities for listed juniors.

America has been basically left untouched (during the resources boom), he said. Youve got prospectors, a few entrepreneurs and then the really big companies. And theres nothing really in the void in between except for a few junior Canadian companies. So America is awash with opportunities ... it is a matter of picking through the opportunities and cutting a deal. Thats the hard part.

Under the terms of the agreement Richmond can exercise the option at anytime up to and including 10 May 2011 for a consideration of $US6 million, 50% of which can be satisfied through the issue of shares in Richmond.

Exercise of the option will give Richmond a 100% beneficial ownership of the project and an 80% net profits interest (NPI). Following exercise of the option Richmond then has an additional 18 months to acquire the outstanding 20% NPI for a consideration of $US2 million in cash or alternately $US1 million in cash and a gross revenue royalty of 1.5%.

Richmond had just over $A2 million cash at the beginning of the September quarter, and well-in-the-money options worth $A3 million expiring at the end of the year. The aim has been to complete feasibility work by the end of the year, and Nind indicated the company was comfortable with the state of its treasury.

Were not raising additional funds in the short term, no, thats not the plan at present.

Still, the 43c the stock was fetching this week is a long way north of its 52-week low of 8c. Evidently the market is warming to the theme that magnetites aint magnetites.