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Australian iron ore majors back landmark project to boost high grade hopes

SNL Image
The Kidson Deep Crustal Seismic Reflection Survey being undertaken in Western Australia's Pilbara region in 2018.
Source: West Australian government

Experts believe Western Australia's iron ore production could return to higher grades than are currently being mined, which could be facilitated by a new research program being backed by Rio Tinto, BHP Group, Fortescue Metals Group Ltd. and Roy Hill Holdings Pty Ltd..

Sandra Occhipinti, research director for the minerals exploration program of the Commonwealth Scientific and Industrial Research Organisation, or CSIRO, flagged the potential for higher grades under deeper cover at the Australasian Institute of Mining and Metallurgy's Iron Ore 2019 conference in July in Perth.

She subsequently said in an interview that while the easy-to-reach high grades are mined out, "there is no need to think that they've actually mined the best ore," but information is currently limited as she is not aware of any 3D modelling done in the Hamersley Basin.

S&P Global Market Intelligence has learned that a proposed research between CSIRO, the iron ore miners and Curtin University will be conducted in Perth over two years. A proposal is also with Minerals Research Institute of Western Australia to secure potential additional funding for the project.

From this, CSIRO hopes to build a 3D map of the distribution of iron ore in the Hamersley Basin where the above mentioned companies operate. This will then help companies model the location of the high-grade iron ore.

Thirty-year CSIRO veteran Erick Ramanaidou, now the agency's iron ore and lateritic nickel commodity research leader, said mining higher-grade ores would allow companies to "take control" of their product rather than be at the whim of commodity prices in churning out high volumes of low-grade ore.

Grades up to around 65% were initially mined from the Martite-microplaty hematite ore from the 1960s at Mt Whaleback, now part of BHP's Newman property, and Rio Tinto's Mt Tom Price. However, Ramanaidou said miners have since shifted to the lower-grade Martite Goethite, which will be the focus of CSIRO's proposed study as there is very little information on it, particularly the relationship between the landscape evolution and the deposits.

Occhipinti said such grades are tougher to find under cover where ores are not necessarily magnetic and therefore won't be identified by magnetic surveys.

SNL Image
GSWA director Ian Tyler.
Source: WA Government

Ian Tyler, Director of Geoscience at the Geological Survey of Western Australia, said gold mineralization at Northern Star Resources Ltd.'s Paulsens and Mount Olympus gold operations in the Pilbara suggests evidence of mineralization along the Hamersley Basin's southern edge which may also contain hidden high grade iron ore.

Tyler, who was involved in the last major geological study of the Hamersley Basin in the 1980s, said the Pilbara conglomerate gold which has captivated investors in the past two years is also helping to develop the industry's understanding of how the region's geology evolved.

Mining future grades

Some believe mining under cover will require going underground, which is currently done with iron ore in Sweden on a smaller scale, though it is much more expensive due to the amount of mine waste, and anything below about 300 meters in Western Australia is considered uneconomic.

However, Ramanaidou says they may simply be able to make the open pit mines deeper and blend the higher grades with existing lower grades before shipping.

While industry sources say bigger iron ore miners are only looking at regional exploration at a similar depth to existing operations as opposed to under cover, Fortescue CEO Elizabeth Gaines said in an email interview that early stage exploration is "key to unlocking significant value."

She said Fortescue's large resource base is built on successful exploration over the past 15 years, which includes targeting resources under cover. Fortescue holds the largest tenement portfolio in the Pilbara with the majority of its 13 billion tonne hematite resource base being under shallow cover.

Gaines said Fortescue's Western Hub resources in particular include significant amounts of high-iron content bedded iron ore hosted in both the Brockman and Marra Mamba Formations.

In December 2018, Fortescue started shipping its new 60.1% iron ore product, West Pilbara Fines, which is currently a blend of higher iron, low alumina ore from the western pits at Cloudbreak and at Firetail.

Together with the Iron Bridge magnetite project, Eliwana due to start up in December 2020 will lift the average iron content of Fortescue's ores, helping the company with its aim to have most of its products at greater than 60% iron ore.