South Australia-focused iron ore developer IronClad Mining (ASX:IFE) has taken one giant leap towards becoming Australia’s next iron ore mining company.
The giant leap came in the form of the regulatory step of the granting of a Mining Lease Proposal (MLP) by the South Australian Government.
The MLP effectively presented the company with the go-ahead for its flagship Wilcherry Hill iron ore project.
The Wilcherry Hill project is a Joint Venture between IronClad (80 per cent) and Trafford Resources (ASX:TRF) (20 per cent) located 30 kilometres north of Kimba on the Eyre Peninsula.
The project boasts a JORC-compliant Resource of 276 million tonnes of iron ore, of which 69.3 million tonnes is high-quality, low-contaminant crystalline magnetite.
“The MLP approval is a huge boost for the company,” IronClad Mining executive chairman Ian Finch told The Inside Story.
“It is an extremely important milestone for IronClad as it signifies the start of the company’s transition from being one of many ASX-listed iron ore exploration plays to being an iron ore producer.”
Having received S.A. Government approval for Wilcherry Hill, the final box the company is waiting to be ticked is the one that says it has the necessary finances in order to fund the project.
According to Finch, negotiations for financing the start-up production phase are already well-advanced with the company receiving a great deal of interest from a number of banks, sophisticated investors and other financial institutions.
Finch said a certain amount of the project funding would most likely be raised through borrowing, which the company anticipates will be paid back from early production profits.
“We choose to do that because we want to keep the number of shares on issue in the company relatively small,” Finch explained.
“We hope that a shareholding in IronClad will come to be considered as a valuable commodity so that people who own shares in IronClad believe they own something that is really worthwhile.”
IronClad Mining has a tight shareholding with just-on 75 million shares on issue, with slightly over 27 million of these shares (approximately 36 per cent) held by Trafford Resources.
The green light from the S.A. Government follows the recent signing of an agreement between IronClad and Sea Transport Development S.A. for the development of a floating harbour located off Lucky Bay, 150 kilometres south of Wilcherry Hill, near Cowell, on South Australia’s Spencer Gulf.
IronClad initially considered the option of transporting its ore from the mine at Wilcherry Hill via road to a site near Whyalla.
From there it was to be railed to Port Adelaide where it was to have eventually been loaded onto Panamax and smaller cape-size vessels, which would have added a further 350km as well as considerable time and extra freight costs to the journey.
The company now plans to trans-ship its iron ore from a holding warehouse at the Lucky Bay port site to a floating harbour, which will be sitting some seven-to-ten kilometres offshore.
IronClad has agreed to finance and develop the floating harbour, which when finished will be capable of loading cape-sized vessels with a capacity of up to 150,000 tonnes of iron ore.
“We exercised our option with Sea Transport, the proponents of that port, and they have been fully supported as such by the South Australian Government,” Finch said.
“We took an option for the usage of the port and over fifty hectares of ground in order to secure our future at the port.
“The multi-user, bulk shipping port facility we are now developing will allow us to transport our initial iron ore by road from Wilcherry Hill to onshore loading facilities at Lucky Bay.
“From there it will be loaded onto customised barges for transportation to the floating harbour.
“It will then be transferred to cape size ships docked alongside the offshore facility.”
As far as iron ore mines go, IronClad’s strategic plans for future development at Wilcherry Hill are fairly straight-forward.
The company intends to rapidly expand the project in three stages as it moves to its total production target of producing over 10 million tonnes of iron ore a year.
During the first stage IronClad hopes to produce one million tonnes of ore, from which it expects to escalate production by ramping up to two million tonnes in its second year of production.
A recent feasibility study carried out for stage one of the project established that, with an average iron ore price of $135 per tonne Free On Board into China and initial operating costs of around $85 per tonne, the project would provide IronClad with strong margins of approximately $50 per tonne and an operating surplus of around $100 million a year at full production during the first stage.
The second mining stage will concentrate on the wet beneficiation of the remainder of the Wilcherry Hill low contaminant, crystalline ore.
Following a full feasibility study for this phase, IronClad expects that delivery of the increased volumes of ore to the port is likely to be via a slurry pipe.
“The floating harbour, which is the ultimate design for our export purposes, will not be in place for the first two years because it has to be built and we also have to be producing enough tonnage to justify it,” Finch explained.
“That tonnage is expected to be achieved in our third year of production.
“In our strategic plan we go from one million tonnes in our first year to two million tonnes in the second year to four million tonnes in year three.
“The third year will see the commissioning of the floating harbour to coincide with the introduction of ore from the Wilcherry Hill stage two and the company’s Hercules deposit.”
IronClad considers the exploration potential of its Hercules deposit to be great with the deposit displaying properties consistent with major Banded Iron Formation projects usually found in the Middleback Ranges and Pilbara regions.
The deposit currently has a JORC-compliant Resource of 198Mt but the company is confident it could possibly reach a target of anywhere between 1500Mt to 2000Mt.
As things currently stand on the Eyre Peninsula, the Wilcherry Hill project is on target to produce its first shipment of Direct Shipping Ore for sale to Chinese steel mills in the first quarter of the 2012 calendar year.
Having just attained the MLP and still several months away from its first ore production, Wilcherry Hill is already attracting worldwide attention.
IronClad has already been successful in attracting buyers and has already sold the first two years of production from stage one through a comprehensive sales contract and marketing agreement with Singapore based agents.
IronClad Mining and the SA Government are now in the final stages of finalising the full operational approvals for the mine.
The company’s extensive Program for Environmental Protection and Rehabilitation (formerly known as a Mining and Rehabilitation Program, or MARP) is due to be submitted soon for approval.
Finch said the company anticipates that process to be completed within two to three months, which would be ideal timing to meet the scheduled mine start-up, which is due early next year.
“We are highly enthusiastic about the potential of Wilcherry Hill,” Finch said.
“We are very much looking forward to developing this in-demand iron ore project.”
IronClad Mining (ASX:IFE)
…The Short Story
Level 2, 679 Murray Street,
West Perth, WA 6005
T: +61 (08) 9485 1040
F: +61 (08) 9485 1050
Ian Finch, Neil McKay, Peter Rowe
Trafford Resources 36.37%
HSBC Custody Nominees (Australia) 7.29%
Golden Stone Partners 5%