The depressed iron ore price is prompting “gun shy” Padbury Mining to increase its tenement asset base, snapping up a hematite and magnetite deposit owned by Radar Iron.
The depressed iron ore price is prompting “gun shy” Padbury Mining to increase its tenement asset base, snapping up a hematite and magnetite deposit owned by Radar Iron.
Radar Iron has signed an option agreement with Padbury Mining to sell its iron ore rights and two tenements in the Yilgarn worth $500,000.
Radar will put the money towards its Yerecoin magnetite project 150 kilometres north-east of Perth, estimated to cost between $30 million and $35 million to develop.
Padbury Mining managing director Gary Stokes told Business News that, following very public failed plans to develop the long-heralded Oakajee port project, he was still interested in developing the multi-billion dollar project, but no announcements would be made without serious due-diligence.
“We’re a little gun shy,” Mr Stokes said.
“I say this to our shareholders when they ring and say ‘what’s going on?’, I say ‘have you seen the announcement’ and they immediately go ‘oh, no, no no, what’s the announcement?’ and I say, ‘well there isn’t one’.
“When we’ve got something to say that’s tangible and all the i’s are dotted, the t’s are crossed and everything’s in concrete obviously we’re obligated to make those announcements through the ASX and that’s what we’ll continue to do.”
Mr Stokes said current low iron ore prices meant now was a good time to buy and it would be targeting companies looking to offload tenements in the Yilgarn and Mid West region.
“We will look at whatever opportunities are out there to add to our asset base,” he said.
“In this case (Radar) have a JORC resource of 350 odd million tonnes ... so it made sense for them because they want to focus on their Yerecoin project and it made sense for us, it’s adding to our 925 million JORC that we already have.”
Radar Iron managing director Jonathan Lea told Business News after being approached by Padbury and others to buy the two Yilgarn tenements it took the opportunity to free itself up to focus on its Yerecoin project.
“We’ve still got about 700 square kilometres of tenements in the (Yilgarn) and we would still look at exploring iron ore in those tenements and adding value in coming years, but obviously not as a key focus,” Mr Lea said.
Radar is doing a feasibility study to develop Yerecoin at a low capital cost aimed at first production of 250,000 tonnes in 2016 and eventually growing to 1mt to 2mt production.
Mr Lea said following the completion of the feasibility study in 12 months Radar would seek to raise money for the $30 million to $35 million project through new major shareholder Victory Mining, an equity off-take agreement and/or debt.
Radar is pushing ahead with its current capital raising plans, which were interrupted by a further drop in the iron ore price.
Private investment company Victory, which has backed Radar’s strategy for Yerecoin, agreed to take a 19.7 per cent stake in Radar for $900,000 and underwrite a $4.6 million capital raising last month through the placement of shares at 3.5 cents.
Last month, Radar released a new timetable for the rights issue which closes applications on 10 December.
Mr Lea said the Yerecoin project would during construction employ 50 to 100 people and require 30 to 40 people during operation.
He said at today’s iron ore prices of around $US70/t the project was still profitable as its all-in costs were likely to be about $80-$90/t but its higher grade processed ore would attract a premium of around $110-$120/t at today’s prices.
He predicted the iron ore price would rise back to $US90-$US100/t within 12-18 months.
Mr Lea said as the mine, which is near rail lines to Fremantle port, increased production up to 1-2mt its all-in costs would decrease by $10-$15/t.
“Starting small and getting to that sweet spot of one to two million tonnes that actually makes a lot of sense in terms of the infrastructure we’ve got at our disposal and the capacity of the train line and the capacity of the port,” he said.
