December 2021
With the 62% Fe iron ore price declining significantly to US$100/t in September from highs of over US$230/t in May and expected to remain weak beyond 2021, several junior iron ore miners in Australia are facing pressure and have had to revise mine plans.

Venture Minerals announced in September 2021 that its Riley mine in Tasmania had been put on care and maintenance after shipping the first iron ore of 46kt. Indus Mining announced that its Ridges mine in Western Australia has been put on care and maintenance, as the mine has reached its breakeven point due to a low Fe grade of 52%. In addition, GWR Group announced on 19th September that its Wiluna West C4 deposit in Western Australia had been put on care and maintenance.

Riley

Australian junior iron ore miner Venture Minerals’ Riley DSO iron ore mine is located 120km south from the Port of Burnie on the northern coast of Tasmania. The mine’s reserve is ~3.6Mt with 57% Fe content. Riley mine was put on care and maintenance after it shipped the first iron ore of 46kt with a Fe grade of 57.3% via Burnie Port.

The decision came as the 62% Fe iron ore price declined significantly from highs of over US$230/t in May to US$100/t in September, and amid high freight rates. It is estimated that the discount rate of Riley’s 57% Fe grade ore to 62% is ~30%, compared with the 10% discount rate used in the company’s 2019 feasibility study. In addition, the shipment costs from Tasmania to China have jumped to US$54/t from the US$18/t used in the feasibility study.

Venture Minerals has retained the Riley Mining Team during the period of maintenance, so that when market conditions improve, the company can recommence operations immediately.

Ridges

The Ridges iron ore project is situated in the far north of Western Australia, 165km by road south of Wyndham and adjacent to the Great Northern Highway. The project is owned by Kimberly Metals Group (KMG). The mine produces 1.5Mtpa of DSO fines with a grade of 59.2% Fe. In the middle of 2020, Indus signed an agreement to operate the mine as part of a joint venture with Habrok Mining and Ridges Iron Ore Pty Ltd. Road trains of approximately 100t capacity transport the iron ore 170km from the mine site to the port of Wyndham.

Indus Mining announced that the Ridges mine in Western Australia had been put on care and maintenance due to iron ore price volatility at the end of September. The company said that the mine had reached its breakeven point due to its lower Fe grade of 52%.

Wiluna West C4

The Wiluna West Project is located about 35–40km southwest of Wiluna and 750km northeast of Perth. The C4 project is stage 1 of the Wiluna West Project, with mineral resources of 21.6Mt with Fe content of 60.7%.

GWR signed an offtake agreement with Macarthur Minerals in July to ship an additional 400kt from its Wiluna West project in Western Australia's Goldfields region. The offtake will utilise Macarthur's existing haulage agreement with Pacific National to export the additional volumes through the Port of Esperance. This will be in addition to the existing volumes that GWR exports through the Port of Geraldton.

GWR Group announced on 19th September 2021 that its Wiluna West C4 deposit in Western Australia had been put on care and maintenance for 30 days.

The decision came as the 62% Fe iron ore price declined significantly from highs of over US$230/t in May to its current level of ~US$100/t. GWR said that ~660Kt of iron ore fine has been shipped since February 2021. In addition, 172.5Kt of ore has been stockpiled at the mine site and another 143kt with Fe content of 61.8% has been blasted in the pit. The Company advised on 25th October 2021 that it will maintain this suspension on mining for a further 14 days whilst it continues discussions with market participants and monitors the iron ore price.

Shine

Development of Mount Gibson Iron Limited’s Shine project, located 85km north of the company’s Extension Hill site, commenced in late 2020 with an initial targeted mine life of two years from an initial Ore Reserve of 2.8Mt grading 59.4% Fe. Production commenced in April 2021. Ore is crushed on-site and trucked 300km via public roads to the company’s export facilities at Geraldton Port.

Mining and processing operations at Shine performed in line with expectations during the quarter. A total of 2.9Mwmt of material was mined, including 240kwmt of ore, and the first shipment was completed in late August 2021 as scheduled. By quarter end, two shipments totalling 119Kwmt of lump ore grading 58.8% Fe had been exported from Geraldton Port.

Mount Gibson Iron suspended its Shine iron ore mine in October 2021 in response to the recent adverse movements in the price of iron. The company has withdrawn sales guidance for the current year following this decision. The decision reflects the recent rapid deterioration in iron ore prices, which has affected lower and medium grade ore operations in particular, having occurred as shipping freight charges significantly increased.

Paulsens East

The Paulsens East Project is located ~200km west of Paraburdoo, and ~600km by road from Port Hedland. Strike Resources completed the scoping study for the mine in November 2019 and the feasibility study in October 2020. The company confirmed the project's production rate at 1.5Mtpa over an initial four-year mine life with direct shipping ore (DSO) (lump 75% and fines 25%) product trucked to Port Hedland for export. The total of 6.2Mt iron ore (61.5% Fe content) will be produced during the period.

Processed lump and fines products will be trucked ~600km from the mine to the Utah Point Multi-User Bulk Handling facility at Port Hedland. The stripping ratio is ~3 and the initial capital cost is A$15.7m (US$11m). Strike Resources expects to start production at Paulsens East in mid-2021.

However, given the volatility in the iron ore price and capital market conditions, Strike has undertaken a review of production ramp-up and export logistics to optimise project economics, reducing upfront capex and LOM opex and allowing for earlier cashflows. The production guidance of 2022 has been decreased to 400Kt from the previously planned 1.1Mt. A final investment decision on Paulsens East will be made pending the finalisation of contracts with key contractors and service providers and the finalisation of the structure and terms for iron ore offtake and project financing.

Conclusion

Junior miners in Australia are more sensitive to volatility in the iron ore price than are leading companies, such as BHP and Rio Tinto, as they have less risk resistance. In general, the greatest challenge these small-scale iron ore mines are facing is higher inland freight costs to ports, as their ore is transported by truck, not by train, although their mining costs are lower as the stripping ratio is as low as 0.1 in some projects.

In addition, these small projects sell their products at a steep discount due to their low iron ore grade. With this, combined with the recent high freight charges, AME does not expect that these projects will resume operations in the near term.