THE BOURSE WHISPERER: Forge Resources has signed all the necessary legally binding agreements with Atlas Iron to acquire the Balla Balla magnetite, vanadium and titanium project in Western Australia.
The Balla Balla project came into Atlas’ possession after it acquired Aurox Resources in August 2010.
Balla Balla is located near the Pilbara coastline, approximately 100 kilometres east of Anketell Point and 120km south-west of Port Hedland, and adjacent to the Pilbara Energy Gas pipeline and the grid power line between Karratha and Port Hedland.
Balla Balla project Location Map. Source: Company announcement
The Balla Balla project has a JORC compliant Resource of 456 million tonnes at 45 per cent iron, 0.64 per cent vanadium, and 13.7 per cent titanium.
A Definitive Feasibility Study was completed on the project in February 2010 that confirmed strong project economics using historical commodity prices of A$68 per tonne magnetite at 58 per cent iron concentrate grade and A$152/t concentrate at 45 per cent titanium concentrate grade, compared to current prices of approximately US$120/t and US$225/t respectively.
In its release to the Australian Securities Exchange announcing the deal Forge Resources said it believes the Balla Balla project is an exciting opportunity for a number of reasons.
These include the advancement already achieved at the project and its low technical and resource risk.
“The project is at the DFS stage and has a mineral reserve on an approved mining lease,” Forge said.
“The resource is well defined and with potential for extension. Processing is simple and well understood. The magnetite process is a crush, grind, and magnetic separation. The ilmenite circuit is further gravity and magnetic separation, followed by flotation.”
Forge said the project possesses strong economics that are driven by low operating costs for magnetite production.
The project holds ilmenite by-product credits that Forge said, assuming current pricing, would contribute $10 per tonne of magnetite as a by-product credit.
Balla Balla is located close to the coast, providing it with a transportation cost advantage compared to other iron ore projects located further inland.
The project is expected to produce a relatively coarse grained magnetite concentrate that will cost less to mill.
At its recent Annual general Meeting, Forge Resources was forward-thinking enough to seek shareholder approval to have a share placement facility on hand so additional equity funds can be raised for such a purchase.
The company therefore has already secured shareholder approval for a share placement facility of up to 30 million shares.
The company said it will now use that share placement facility to raise funds to meet the conditions to make the initial payment to Atlas.
The Roadhouse holds shares in Atlas Iron.