21 Oct, 2024
Baowu has another potential blending option for Simandou – Arrow Minerals chief
| David Flanagan, managing director of Arrow Minerals, at the Kowouleni prospect at Simandou North. The company has signed a memorandum of understanding with Baosteel Resources Holding (Shanghai) Co. Ltd Source: Arrow Minerals Ltd. |
China Baowu Steel Group Co. Ltd. has moved toward signing up for more product to potentially blend with material from its Simandou iron ore project in Guinea, according to David Flanagan, managing director of Arrow Minerals Ltd.
Iron ore producers can sell more products if they blend very high-grade iron ore from mines such as Simandou with lower grade ore from Australia's Pilbara region.
"The more high-grade material Baowu gets out of Simandou, the more options they've got; and when they buy our product, it will just add to theirs, and it will grow their tonnage," Flanagan told S&P Global Commodity Insights. "Baowu has a lot of steel mills that they own, and they will distribute the tons to match the blend that they need."
The MOU will also help Arrow Minerals access the benefits of a multiuser railway being built for Simandou, the world's largest undeveloped iron ore project.
The Simandou property is split into two sets of two blocks each. Blocks 1 and 2 of the Simandou deposit are being developed by Baowu and Winning Consortium Simandou, and Simandou Blocks 3 & 4 are being developed by a joint venture led by Rio Tinto Group.
Baowu is also a partner in the joint venture that owns Mineral Resources Ltd.'s Onslow iron ore project in Western Australia. Flanagan said in August that Onslow product, grading 58% iron, will be blended with the 65% iron material out of Baowu's Simandou project to give the China-based steelmaker "a nice average feed grade into the steel mills of 62%."
With the new MOU, Flanagan told Commodity Insights on Oct. 21 that Simandou North's ore could be beneficiated to provide higher-grade product for Baowu to also blend with its own Simandou ore along with lower-grade Pilbara ore from other producers, to find the right blend for their steel mills.
"We have product which is like the itabirite ore in Brazil which requires some gravity separation. And that product we can deliver fairly cost-effectively at between 61% and 64%," Flanagan said of Simandou North, which could be in production in 2026.
Preliminary metallurgical test work at Simandou North has achieved a 61%-64% iron, low-alumina hematite fines product from a wet gravity process. Arrow Minerals said it is looking at similar beneficiation methods to those used in the Pilbara, where "most are seeking to reduce alumina and silica in the final product," but Simandou North will only need to reduce silica in its final product, according to the company's Oct. 21 statement.
Therefore, "it's not a big stretch" to see Simandou North product being blended with Simandou and lower-grade product coming out of the Pilbara for Baowu's steel mills, Flanagan said.
Options from West Australian miners
Baowu has many options from the Pilbara, where it is the largest customer of major iron ore producer Fortescue Ltd., which brought into production its high-grade Iron Bridge operation in 2023. Baowu is also a major customer of other Pilbara producers Rio Tinto and BHP Group Ltd.
Rio Tinto CEO Jakob Stausholm told a media call in July that the Simandou deposit provides optionality to blend with lower-grade ores elsewhere, thus presenting "an opportunity to get more value out of our great production out of the Pilbara" where grades are declining.
Rio Tinto's Oct. 16 third-quarter production results also revealed that, while the company's Pilbara iron ore shipments were 1% higher year over year, its lower-grade SP10 volumes were slightly higher than the first half of 2024 and are expected to remain elevated until replacement projects are delivered.
"We are reviewing our future product strategy, having regard to customer requirements and available ore grades," Rio Tinto said of Pilbara in its quarterly report.
The company's plans to review its Pilbara strategy is a "key concern" given that it "comes after numerous quarters of higher-than-anticipated SP10 volumes," RBC Capital Markets analysts said in a recent note.