Iron ore miner Fortescue Metals Group has taken another step towards development of its extensive magnetite deposits in the Pilbara, annuncing plans to transfer the assets into a Hong Kong company jointly owned by Chinese steel giant Baosteel.
The groups will consolidate their magnetite interests in the Glacier Valley and Northstar mining leases into FMG Iron Bridge Ltd.
Upon completion of the deal, Fortescue will own 88 per cent of the entity and Baosteel 12 per cent, subject to regulatory approval.
The Northstar (100 per cent Fortescue) and Glacier Valley (65 per cent Fortescue, 35 per cent Baosteel) magnetite deposits have a Joint Ore Reserves Committee compliant resource of 3.2 billion tonnes.
Fortescue chief executive Nev Power said the deal consolidated "one of the world's most prospective magnetite projects", with close proximity to customers and rail and port infrastructure.
The company has previously advised that it was conducting feasibility studies on the devlopment of a 20-30 million tonne per annum project, producing blast furnace feedstock with a high 66 per cent iron content.
Fortescue said this would result in a forecast mine life of more than 20 years.
The company has also said that it was evaluating options to partner with third parties, and intended to structure any development of the project on a non-recourse basis to its balance sheet.
It has previously flagged the possibility that its magnetite projects may be listed on the Hong Kong stock exchange.
Magnetite ores contain less iron than the 'direct shipping', hematite ores that dominate mining activity in the Pilbara. Magnetite projects also have higher start-up and processing costs but the final product has a higher iron content.
The Sino Iron project in the Pilbara, and the Karara project in the Mid West, both currently under development, will be WA's first magnetite producers. Both are backed by Chinese steel mills, which traditionally have used magnetite ore as feedstock for their steel mills.
Fortescue shares closed up 2.9 per cent on the news.