Optimism for ferro-alloy project

EFFORTS to put Australia at the forefront of value-added ferro-alloy production, like most things, took a step back following the September 11 terrorist attacks.

Now the backers of a mooted $200 million ferro-alloy plant in the Pilbara, Michael Walters and Tim Adams, are hoping to ride the new-year optimism the resource sector has been enjoying.

The partners, through their one-project company Australian Ferroalloys Pty Ltd, have been working to get the project off the ground for the past year.

With a positive pre-feasibility study in hand, the company and its half-share partner, Australian Heritage Group’s 50 per cent-owned Mineral Securities, are hoping to shake free some of the dollars from the resource tree which will take the project through the bankable feasibility stage.

Around $4 million is required, which the directors are positive will be raised by mid-year, with a public listing now appearing to be the most promising alternative.

If the production plant goes ahead, it will be the only one based in Australia and will be capable of producing up to 150,000 tonnes of ferro-alloys for the stainless steel market a year.

But the project will be entering a fiercely competitive market, dominated by the Chinese as well as struggling South African producers.

Australian Ferroalloys believes the close proximity to suppliers and buyers that the Pilbara location offers, as well as relatively cheap energy costs, will provide a competitive advantage.

In addition, Mr Adams believes the demand for stainless steel will hold up.

“The stainless steel industry has been growing just under 6 per cent per annum. In the past forty to fifty years there have only been two or three years in which there has been a contraction (in stainless steel demand).”

Manganese alloys fetch about $400 a tonne, against less than $100 a tonne for raw manganese ore.

Ferro-chrome commands about $300 a tonne, compared with only $60 a tonne for chromite.

Originally flagged as a potential financial backer of the plant, WA manganese and chromite producer Consolidated Minerals has distanced itself from funding the project.

Consolidated minerals managing director Michael Kiernan said that while preliminary discussions had taken place, there had since been no further discussions on funding.

Although willing to supply the plant with chromite and manganese, Mr Kiernan said it was highly unlikely that the company would get directly involved in the project.

“As a company, strategically we are manganese and chromite ore suppliers and we are not interested in value-added projects. We are an explorer and a producer. We don’t wish to go down the second step,” Mr Kiernan said.

He said being non-aligned to a ferro-alloy producer also provided the company with the flexibility to negotiate with a number of buyers from around the world.

A commodity report produced by the Australian Bureau of Agricultural and Resource Economics showed that Australia exported almost 1,500 kilotonnes of manganese ore in 2000 to the stainless steel markets of Asia.

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