ASX-listed aspiring WA iron ore producer, Strike Resources continues to make steady progress towards a final investment decision on its proposed Paulsens East iron ore mine development, approximately 140 kilometres west of Tom Price and 200 kilometres west of Paraburdoo in the Pilbara region. The Perth-based company says key project development approval applications and submissions are now well advanced with Government agencies and local authorities.
Strike recently lodged its proposal for the issue of a mining permit and its proposed project management plan for Paulsens East, along with a poultice of other permit, licence and capital works approval applications.
Following an initial review of the mining permit submission, the company says the WA Department of Mines requested clarification on some issues, which Strike says is normal for such submissions. It is currently preparing a response to the department’s request and expects to deliver it shortly.
Strike is eyeing annual iron ore production at Paulsens East of 1.5 million tonnes of high-grade direct shipping ore, or “DSO” for a minimum mine life of four years, with production start-up targeted for this year.
Financial metric outcomes in the company’s October 2020 feasibility study on Paulsens East include the project spitting out operating cash flows before tax of just under $70 million a year over the initial four-year life of mine using a benchmark iron price of US$115 per tonne and a currency exchange rate of US$0.70.
Currently, the iron ore price is sailing along at a touch under US$170 per tonne and the Australian dollar is trading above US$0.77.
Pre-production CAPEX for the proposed open-cut mining, crushing, screening, haulage and export iron ore operation has been estimated in the study at a seriously low $15.7 million including an allowance for contingencies.
Cash operating costs free on board have been forecast to average a very respectable US$64.80 per tonne of iron ore.
Paulsens East takes in a 3km-long outcropping high-grade hematite ridge that hosts an indicated mineral resource of 9.6 million tonnes at an average grade of 61.1 per cent iron at a cut-off grade of 58 per cent iron. The resource estimate includes probable ore reserves of 6.2 million tonnes going 59.9 per cent iron at a cut-off grade of 55 per cent.
Strike says metallurgical and beneficiation test work shows that Paulsens East could produce DSO products averaging a lump grade of 62 per cent iron and a fines grade of 59 per cent across the four years using a simple dry crushing and screening circuit.
Lump to fines ratios have been estimated at around 75:25.
Interestingly, the company suggests the iron ore produced may be amenable to being upgraded to a premium product via the implementation of an optional beneficiation circuit comprising one or more ore sorters.
Strike says the ore sorters could essentially be “bolted on” to the standard crushing and screening circuit and would be used to lift the grade and quality of the lump and fines products further.
The company explains that whilst the ore sorters would add to the overall CAPEX of the project development, they would lead to a higher premium price for the iron ore produced, potentially significantly increasing projected cash flows.
It intends making a call on the ore sorters at the same time as the final investment decision on the Paulsens East development.
Strike Resources Managing Director, William Johnson said: “The company is highly encouraged by work that has indicated the potential to create a value addition to project economics through lowering transport costs and creating a higher-value premium product for sale.”
“Current activity is focused upon securing all the necessary approvals and permits required to commence site operations, advancing negotiations with potential contractors, finalising all engineering designs and entering into final offtake agreements with one or more selected partners.”
Strike says the lump ore premium price companies enjoy over fines ore pricing has increased appreciably, reaching record highs this month of US$0.51 per dry metric tonne unit versus US$0.20 per dry metric tonne unit assumed in the Paulsens East feasibility study.
According to the company, based on an iron content of 62 per cent, the Paulsens East lump ore product may be in line to attract a premium of approximately US$32 per tonne once the lump product is established in the market.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
