Cyclone Metals Ltd (ASX:CLE) has signed a memorandum of understanding (MoU) with Vale S.A, outlining the key terms for a strategic partnership with the goal of advancing the Iron Bear Project to a decision to mine (DTM).
"The partnership with Vale is transformational for the company and eclipses the Cape Lambert, African Iron (ASX:AKI) and CopperCo hugely successful transactions in our past,” Cyclone Metals non-executive chair Tony Sage said.
CLE is developing the Iron Bear Project in the Labrador Trough of Quebec, Canada, as a low-carbon emission, high-grade iron mine.
The project hosts a mineral resource estimate of 16.6 billion tonnes at 29.3% Fe (iron), just 25 kilometres from an open access heavy haul railway, directly connected to the Sept Isles and Pointe Noire iron ore export ports.
The Menihek hydro-plant 75 kilometres away offers access to cheap, established renewable energy, and large-scale iron ore export operations are already in operation using the same rail and port infrastructure.
Realising the full potential of Iron Bear
"Vale is a powerhouse for the production of ultra clean iron ore products which includes direct reduction (DR) pellets and their proprietary cold briquettes,” Cyclone Metals CEO Paul Berend said.
“They are an ideal partner for us, and we look forward to leveraging Vale’s extensive operational and financial resources to realise the full potential of Iron Bear.”
Vale S.A is one of the world’s largest producers of iron ore and iron ore pellets, with an annual output exceeding 300 million tonnes.
The company’s infrastructure network spans over 2,000 kilometres of heavy-haul railways and multiple deep-water ports, enabling efficient large-scale exports to steelmakers worldwide.
With Iron Bear already enjoying ready access to port infrastructure, Vale’s logistical expertise and extensive global infrastructure offer strong potential synergies for both companies.
Details of the Vale MoU
The MoU sets out a two-phased pathway for Vale to earn a controlling interest in Iron Bear.
The first phase involves US$18 million in funding to support a preliminary feasibility study, mineral resource drilling and environmental baseline studies for Iron Bear – Vale can withdraw at any point during the first phase but will not earn an interest in the project.
The second phase involves the formation of a joint venture (JV) company with CLE, initially earning a 30% interest with an option to increase to 75% upon DTM or when Vale’s total contribution reaches US$120 million.
Until the 75% interest stage, the two companies will each appoint two of five board seats on the JV’s governing board, with an independent chair to be agreed upon – Vale will nominate the majority of directors once its interest reaches 75%.
Formal agreement within 90 days
Should a decision to mine be reached, Vale will also have the option (subject to CLE shareholder approval) to acquire the remaining 25% interest in the Iron Bear JV at a fair market value.
Alternatively, Vale can elect to loan carry Cyclone’s share of capital expenditure and be repaid from Cyclone’s share of future operating profits. If this is the case, Cyclone will retain 25% of the Iron Bear JV interest.
The terms of the MoU are non-binding, setting out a framework for a formal agreement to be finalised within 90 days.
CLE says the formal agreement will establish definitive terms, project governance structures, and funding schedules for the continued advancement of Iron Bear.
Producing low-carbon iron
The Iron Bear Project’s iron ore is hosted in banded iron formation (BIF) magnetite and hematite mineralisation, suitable for direct reduction iron products.
DR iron is a generally cleaner, more sustainable form of iron, suitable for electrical furnaces that can leverage green energy and requiring lower temperatures (and thus lower energy inputs) while also reducing or eliminating the need for coking coal.
World Steel Dynamics (NASDAQ:STLD) predicts that the demand for DR-grade pellets could rise from 136 million tonnes in 2023 to 230 million tonnes by 2030, based on planned new DRI production.
DR-grade concentrate produced at CLE’s pilot plant from Iron Bear mineralisation graded at 71% Fe (iron) and 1.1% silica oxide, offering high yields due to low impurities within the ore body.
Read more: Cyclone Metals advances green steel production with successful pilot plant results at Iron Bear Project in Canada
The company also recently produced what it describes as “world-class” DR iron pellets from Iron Bear, grading at 67.5% Fe (iron), 1.6% silica oxide, 0.12% magnesium oxide, 0.65% calcium oxide and ultra-low deleterious elements.
Read: Cyclone Metals lauds “world-class” specifications of Iron Bear pilot pellet production run
CLE is positioning Iron Bear as a low-carbon DR pellet project with a rapid development plan involving bulk samples of DR and blast furnace (BF) concentrates scheduled to be available for steel mill clients in the fourth quarter of this year.
DR and BF pellets from Iron Bear will be available for potential offtake clients in the second quarter of 2025.