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  • Magnetic Resources Gets Wind In Sale From Positive WA Magnetite Study 0 comments
    Nov 26, 2012 9:09 PM

    Magnetic Resources (ASX: MAU) has completed a conceptual initial financial assessment of the wholly owned Ragged Rock magnetite project in Western Australia indicating a robust economic return.

    Critically, it would take advantage of existing rail infrastructure to Kwinana and Albany and could have Opex of between $64/t - $72/t.

    Consulting engineers Engenium examined production scenarios of 1 and 2 million tonnes per annum (Mtpa) of magnetite concentrate using existing rail infrastructure to Kwinana and Albany.

    The robust results of the study are driven by the combination of what look to be high quality magnetite deposits which are close to rail infrastructure with likely access to port space.

    Albany is the preferred port due to the likelihood of available port space, however the proposed port development of James Point near Kwinana may provide an attractive future option.

    For a 1Mtpa operation via Albany Port, key metrics include $159 to $179 million capital expenditure; $64 to $72 per tonne operating expenditure; a net present value (10%) of $331 to $375 million; and an internal rate of return of 23% to 25%.

    For a 2Mtpa operation via Albany Port, key metrics include $294 to $314 million capital expenditure; $64 to $72 per tonne operating expenditure; a net present value (10%) of $690 to $778 million; and an internal rate of return of 26% to 29%.

    The study used results from Magnetic's preliminary sampling and Davis Tube Recovery (DTR) tests which indicate a head grade of 40% iron, a mass recovery of 35%, a concentrate grade of 68%, and assumes an exploration target tonnage of 400 to 450 million tonnes.

    Other assumptions used in the study include a strip ratio of 1.0, a price of US$117 per tonne f.o.b for 66% iron concentrate, a mine life of 20 years and processing 2.9Mtpa (1Mtpa case) or 5.7Mtpa (2Mtpa case).

    The study assumes mining only a small part of the exploration target outlined to date, ranging from a total of 60 million tonnes (1Mtpa case) to 120 million tonnes (2Mtpa case).

    The logistical study indicates that 2Mtpa of concentrate could be transported on the existing Avon-Albany railway without significant upgrading.

    Subject to finalisation of land access agreements, Magnetic now plans to complete its program of mapping and surface sampling.

    This will be followed by ground magnetic surveys to help prioritise a program of reverse circulation drilling to test the most prospective targets.

    Ragged Rock sampling

    Previous sampling results from multiple coarse grained magnetite targets at Ragged Rock have indicated the potential to produce premium grade magnetite.

    Magnetic has identified 12 targets across the Ragged Rock exploration licence.

    Preliminary results indicate a substantial exploration target of more than 400 million tonnes of magnetite banded iron formation (NYSE:BIF).

    DTR results from weathered zone BIF indicate that a good grade, low impurity product can be achieved using magnetic separation.

    The concentrate grade and mass recovery is expected to improve further in the primary magnetite zone.

    Analysis

    This is a significant outcome for Magnetic, particularly with existing rail infrastructure to port - the bane of many a magnetite developer. As well the Opex levels could provide a good margin. We could see Magnetic Resourcesgaining "carry" on this initial study.

    Proactive Investors is a market leader in the investment news space, providing ASX "Small and Mid-cap" company news, research reports, StockTube videos and One2One Investor Forums.

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