India, through a government-owned mining company, is pushing ahead with plans to become an iron ore miner in Australia despite a series of hiccups and the need to raise fresh funds.
Legacy Iron, an Australian company which is 91% owned by the NMDC (formerly the National Mineral Development Corporation of India) this week announced plans to raise A$24.24 million to help pay for work on the Mt Bevan iron ore project.
NMDC has given a firm commitment that it will subscribe for its full entitlement of the new Legacy shares. Amitava Mukherjee, the chairman of NMDC is also chairman of Legacy.
The Legacy fund raising follows the mid-year release of a pre-feasibility study (PFS) into the project undertaken by one of Legacy’s partners in the project, Hancock Prospecting, a business owned by Australia’s richest person, the multi-billionaire Gina Rinehart.
By completing the PFS, Hancock has lifted its stake in the Mt Bevan joint venture to 51%, with Legacy retaining an interest of 29.4%, while a third partner, Hawthorn Resources has a 19.6% stake.
Getting to the point of producing a document which will form the basis of future more detailed studies has been an expensive process leading to a cautionary warning from the Australian Stock Exhange about Legacy’s financial position.
In August, trading in Legacy’s shares were suspended because of exchange concerns about the company’s financial health which includes (under rule 12:2) the stock exchange being satisfied that a company has adequate funds to remain quoted.
The trading suspension came at the same time Legacy was advised by the exchange to withdraw Mt Bevan production targets beyond the first 10 years.
NMDC Backing Legacy
This week’s fund-raising announcement, and confirmation that NMDC will support the move, should enable Mt Bevan to progress towards its target of becoming a producer of high-grade Australian iron ore for export to India.
The plan, which has a capital cost estimate of US$3.3 billion, is to mine ore at Mt Bevan, located in central Western Australia, upgrading it from a run-of-mine 33.52% iron into a concentrated product assaying more than 70% iron.
The starting point is to mine 32.9 million tons of ore a year to yield 12m/t of dry concentrate, with power coming from a gas hybrid system using 63% renewable energy (wind and solar).
Finished product will be transported by slurry pipeline to a rail head at the town of Menzies before being sent to the Australian south coast port of Esperance which has iron ore export facilities.
Legacy estimated in its mid-year PFS the cash cost of producing a ton of 70% iron ore concentrate at US$64/t.
That cost of production estimate appears to be comfortably below the price for high-grade, low impurity iron ore concentrate which commands a premium over the price for widely traded ore assaying 62% iron.
The next phase of the Mt Bevan project calls for the joint venture partners to spend A$20 million on a forward works program to further define, optimize and de-risk the project.
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