Cyclone Metals Ltd (ASX:CLE) continues to advance its Iron Bear Project — a world-class iron ore project in Canada with a focus on green steel production — having commenced production of direct reduction (DR) grade pellets.
In an operational update, Cyclone says pilot plant test-work has delivered high-quality magnetic products, including DR-grade products with high yields.
The company has also identified potential large outcrops of haematite direct shipping ore (DSO) and large magnetite outcrops during field geological surveys that point to the project’s substantial mineral resource upside. Cyclone says 18 tons of sediment has now been sent to the lab for phase 4 pilot metallurgical test work.
Small-scale production underway
Cyclone Metals CEO Paul Berend said: "I am pleased to report that we have started small-scale production of DR pellets which are critical for green steel production and are projected to be in very high demand in the next couple of years as numerous direct reduction steel plants are being built in the Middle East, the USA and Canada.
“The Iron Bear mineral resource is still delivering more positive surprises with potential Direct Shipping Ore outcrops identified during our recent field trips. The potential of these large outcrops is unknown, but we are excited by the upside.”
Clear operational path
The Iron Bear Project is underpinned by a clear operational plan to rapidly de-risk the asset and enable a potential JV partner to achieve a decision to mine in three to four years.
Cyclone notes that it has now achieved all key development milestones announced in June last year.
The company has identified its next key value milestones as the production of high-quality DR pellets for DR steel mills and the establishment of a JV with a strong operational partner to fund the Iron Bear Project development and support the high capex required to bring a project of this scale into production.
Production of DR-grade pellets
Cyclone has commenced production of DR-grade pellets based on Iron Bear DR concentrate, testing different chemistries to achieve optimum metallisation and physical properties for low-carbon steel production.
The now completed phase 2 pilot plant test work was based on 1.8 tons of sediment to confirm high magnetic iron recovery rates for the production of blast furnace (BF), direct reduction (DR) and reverse flotation (RF) concentrates — in aggregate, magnetic iron recovery was in excess of 97%.
Cyclone has commissioned Corem, a reputable metallurgical laboratory based in Quebec City, to manufacture and test blast furnace (BF) and DR pellets based on Iron Bear BF and DR concentrates.
Cyclone has designed four different chemical compositions for the DR pellets, which are being produced in small batches and being tested for physical and metallisation properties. Results are expected to be released in the next two weeks.
Corem pelletising pot grate furnace and control consol.
DR pellets are the feed used for direct reduction-based steel production — a technology to produce steel using natural gas or hydrogen as a reductant, instead of coal that is traditionally used in blast furnace steel production.
DR steelmaking has a much lower carbon footprint than blast furnace steel. It has half the carbon footprint when using natural gas and closer to zero when using hydrogen.
Hydrogen-based DR steelmaking is considered ‘green steel’ if the hydrogen is sourced from a renewable source of energy.
Most DR steelmaking today is in the Middle East and to a lesser extent, India. There are many expansions of DR-based steel production happening in the Middle East and the Americas; due to the roll-out of CBAM (Carbon Border Adjustment Mechanism) in Europe (high taxes on steel based on the carbon content) and various other policies to reduce the carbon footprint of steel making.
DR pellets have very specific and hard to replicate metallisation or reduction properties. Subsequently, there are only four substantial producers of DR pellets in the world (on the seaborne market) — Vale, IOC and LKAB, and Samarco.
DR pellets currently command a premium of US$50/t versus the 65% iron index, while the standard blast furnace (BF) pellet premium is only US$17/t. If Iron Bear can produce DR-grade pellets, it can achieve a price premium of over US$30/t for no additional cost versus a BF pellet.
Field geological surveys
Field geological surveys completed in July and August have identified potential large outcrops of haematite direct shipping ores (DSO) and large magnetite outcrops.
The rock chip samples have been shipped to the Corem lab in Quebec City for mineralogical and sighter test work which will determine whether these prospective areas warrant exploration drilling.
The company’s geologists physically surveyed the geophysical targets, which had been identified by the desktop studies.
They identified numerous outcrops, noting that some appear to be regular magnetite taconites and others could be medium- to high-grade haematite deposits – potentially, direct shipping ores.
Notably, these are not part of the current Iron Bear inferred and indicated mineral resource of 16.6 billion tons at 29.3% iron.
Paul Berend and Jeremy Peters on taconite outcrop during July survey trip.
Phase 4 core at lab
Cyclone has sent 18 tons of drill cores for the phase four pilot test work to the lab in Quebec City to start phase 4 of the metallurgical test work, targeting the production of around 4 to 5 tonnes of BF and DR concentrate.
These magnetite concentrates will be used to produce bulk samples of DR pellets for metallurgical test work by potential customers.
The company expects to be in a position to start negotiating offtake agreements with potential customers by end of Q4 2024 for concentrates and Q1 2025 for pellets.
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