Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

IronClad Mining moves closer to production at Wilcherry Hill Iron Ore Project

IronClad Mining (ASX: IFE) has been granted Mining Lease Proposal (NYSE:MLP) for its Wilcherry Hill Iron Ore Project in South Australia, marking a significant milestone for Australia's newest iron ore mine using a multi-user bulk shipping port with a floating harbour.

In another first, the project will generate Direct Shipping Ore (DSO) magnetite.

The South Australian Government's approval signifies the start of IronClad's transformation from an explorer/developer to an iron ore producer and paves the way for final government go-ahead, and thus the start up of operations.

The project remains on target to produce first ore for shipment of DSO for sale to Chinese steel mills in the first quarter of the 2012 calendar year.

The company is finalising with the S.A. government full operational approvals for the mine, with the imminent submission of its extensive Program for Environmental Protection and Rehabilitation (OTC:PEPR) and expects that process to be completed within two to three months.

Ian Finch, IronClad Mining's executive chairman, said “Our MLP, prepared in conjunction with Coffey Environments over a two-year period, is an incredibly detailed and comprehensive document, and to finally have it approved by the S.A. Government is a significant development for us.

“We are highly enthusiastic about the potential of Wilcherry Hill, and look forward to developing this in-demand iron ore project.”

IronClad have already sold the first two years of production from Stage One of the project, under a comprehensive sales contract and marketing agreement with its Singapore based agents.

Innovative development

The Wilcherry Hill project, located near Kimba on Eyre Peninsula, has attracted worldwide attention several months out from its maiden production, including widespread interest in a number of unique concepts that the comapny has embraced in order to export its ore.

These include a South Australian first multi-user bulk shipping port facility with a floating harbour that will boost Wilcherry Hill JV Iron Ore project economics with lower transport costs.

Impressively, IronClad's first ore will probably be direct shipping magnetite, also an Australian, if not a world, first.

A feasibility study for Stage One of the project established that, with an average iron ore price of A$135 per tonne FOB (net of freight charges) into China and initial operating costs of around A$85 per tonne, the project would provide IronClad with strong margins of approximately A$50 per tonne and an operating surplus of around A$100 million a year at full production during the first stage.

The Wilcherry Hill Project, an 80:20 Joint Venture between IronClad and its associated company, Trafford Resources Limited (ASX: TRF),  will begin life as a relatively small project by iron ore industry standards, but will be producing a premium grade product.

Significantly, IronClad plans to rapidly expand the project in three stages to a total production target of over 10 million tonnes of iron ore a year, seeing the company rapidly escalate from a ramp up 1 million tonnes in the first year to two million tonnes in the second year of production.

The third year will see the commissioning of the floating harbour to coincide with the introduction of ore from the project's massive Hercules deposit.

Work has recently been completed on the accommodation village within the township of Kimba, with initial accommodation for 40 workers and the capacity to be expanded to house up to 80 workers.

IronClad has signed an agreement with Sea Transport Development SA Pty Ltd (SEATS), the proponents of the port facility at Lucky Bay, near Cowell, on South Australia's Spencer Gulf.

The company proposes to trans-ship its iron ore from a holding warehouse at the Lucky Bay port site to a floating harbour about seven-to-10 kilometres offshore.

IronClad will finance and develop the floating harbour which will enable cape-sized vessels with a capacity of up to 150,000 tonnes to be loaded with Wilcherry Hill iron ore.

The company had previously announced plans to transport iron ore from the mine site via road to a site near Whyalla, where it was to be loaded onto rail to Port Adelaide, before being transferred to Panamax and small cape-size vessels.

However, the multi-user, bulk shipping port facility IronClad are now developing allows the company to transport its initial iron ore by road from Wilcherry Hill to onshore Lucky Bay where it will be loaded onto customised barges to be transported to the floating harbour. It will then be transferred to cape size ships docked alongside the offshore facility.

Importantly, this option will reduce the land transport distance from Wilcherry Hill to port from the initially proposed 520 kilometres to only 154 kilometres.

The company expects to reduce operating costs significantly as a result of the shortened transport distance which will in turn allow it to bring forward production plans and self-fund those plans to a greater degree.

Financing

Financing for the start-up production phase is well underway, with keen interest shown by a large number of banks and other financial institutions.

IronClad intends to remain a wholly Australian-owned and operated iron ore company and with just 75 million shares on issue (about 36% owned by Trafford Resources), and with remaining funding likely to be raised through borrowing and paid back from early production, IronClad will remain a closely held stock - leveraged to news flow.