Magnetite Mines (ASX:MGT) Ltd is attracting increasing interest from downstream iron and steelmaking industry participants for its Razorback Iron Ore Project in South Australia, in line with the global shift to ‘green steel’.
Discussions with potential strategic partners and customers have shed light on the rapidly increasing demand for high-grade magnetite concentrate products in the next five to 15 years but a less than clear response from the supply side to meet the demand.
In a quarterly operational update, Magnetite Mines (ASX:MGT) said it would continue to hold discussions with potential customers with a view of establishing long-term partnerships to support the development and offtake for Razorback.
Permanent shift
The iron and steelmaking sector currently contributes 8% of global CO2 emissions and has commenced shifting permanently away from coal-based technologies to meet net-zero targets under the Paris Agreement to fight climate change.
Crucially, steel production is transitioning away from traditional blast furnace-based ironmaking to electric arc furnace (EAF) based technologies, which require high-grade iron ore feed such as magnetite concentrates.
In the first four months of 2022, China, the world’s largest steelmaking country, approved the construction of 16 new EAFs, adding to 43 EAF approvals in 2021, which is a significant increase compared to previous years, the company noted.
Increasing scale
In response to the growing demand for premium iron ore products, the company announced in September it will increase the planned production scale of Razorback to at least 5 million tonnes per annum from the current 2.2 million tonnes.
To prepare for the strategic shift, it appointed Tim Dobson as the new chief executive officer and Ian Kirkham as the new chief financial officer.
According to the project’s current definitive feasibility study (DFS), Razorback hosts 3 billion tonnes of resource, inclusive of a 473 million tonnes probable ore reserve calculated to support a 30-year mine life at a 2.2 million tonnes per annum production rate.
Optimisation studies for a refocused DFS are underway, with results expected in the first quarter of 2023.
Strengthening ties
The company’s management met with the Board of Directors of the Ngadjuri Nation Aboriginal Corporation at the project site in September to explain the proposed project scope, as well as to lay the foundations for a proposed partnering agreement and Native Title negotiations.
The visit to Razorback also allowed Magnetite Mines (ASX:MGT) staff to learn about the Ngadjuri culture and regional heritage values.
A cultural heritage survey of about 1,000 hectares of the project area was completed by Ngadjuri representatives during the quarter, bringing the total area surveyed to date to almost 3,500 hectares. Survey results are expected in the current quarter.
Magnetite Mines CEO Tim Dobson presents the project to Ngadjuri directors.
Share consolidation
The Magnetite Mines board is planning to seek shareholder approval at the upcoming annual general meeting on November 23, 2022, to consolidate 50 existing shares into one share in a bid to improve its share price.
The consolidation is part of the company’s revised strategic direction to tighten its capital structure to prepare for potential investment by institutional investors.
The board also intends to establish an unmarketable parcel sale facility for shareholders who hold less than $500 worth of fully paid ordinary shares in the first quarter of 2023 to give them an option to retain their shares if they wish.
Turning to its liquidity position, the company had $12.7 million in cash and cash equivalents at the end of September, which should allow it to complete the Ironbark optimisation studies.
It said monthly cashflows have been significantly reduced following the completion of engineering activities associated with Ironbark’s DFS.
To read more about the quarter’s activities, click here.
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