Mineral Resources turns to iron ore rail services

OREANDA-NEWS.  Australian iron ore mining firm Mineral Resources plans to install a beneficiation plant at its Iron Valley mine in the Pilbara region of Western Australia (WA), prior to selling its operations to focus on building an open access rail link.

Mineral Resources will invest A\$130mn (\$102mn) installing the beneficiation plant this year with the aim of upgrading its ore to 62pc Fe from 58pc Fe. The company is currently stockpiling its 58pc Fe fines at Iron Valley and only selling its lump to China because of the "prohibitive" discounts for fines with Fe of below 60pc, Mineral Resources managing director Chris Ellison said. Iron Valley produces 60pc lump and 40pc fines.

Iron Valley, like most other mid-size mines in the Pilbara, trucks iron ore to Port Hedland where it is shipped to China. But this is unsustainable at current iron ore prices because of high costs, according to Ellison. He called on Port Hedland to immediately reduce port charges and pledged to increase the efficiency of its truck haulage operations.

Mineral Resources plans to eventually replace its trucks with a monorail bulk ore transportation system (Bots) by mid-2017 that it plans to open up to other medium-size mining firms in the Pilbara to improve access to stranded iron ore deposits. It is also working on developing its own iron ore transshipment service at Port Hedland with partner Canadian Steamship Lines. Bots is forecast to deliver up to 30mn t/yr of iron ore to Port Hedland from Iron Valley and other third-party mines in the Pilbara.

Mineral Resources, which made a profit of A\$51mn during July-December, has a strong enough balance sheet and undrawn debt facilities to underpin the development, according to Ellison. It plans to sell its iron ore mines to focus on delivering Bots and other mining services opportunities.

Mineral Resources owns the 5mn t/yr Carina iron ore mine in WA's Yilgarn mining region, as well as the 12mn t/yr Iron Valley. The company's mining operations were cash positive during July-December and continue to be in 20215, according to its half-year accounts.

Several parties have looked at building Pilbara open access railways, but the slump in the iron ore price has forced many to withdraw their plans. Australian infrastructure firm Aurizon last week signalled that its 30mn t/yr West Pilbara rail project with China's Boasteel would be "very challenging" with a long-term iron ore price of \$60/t.

The price for 62pc Fe fines has fallen to \$61.65/t cfr China from \$121.75/t around a year ago, while the price for 58pc Fe fines has fallen to \$53.55/t cfr China from \$110.80/t over the same period.

But Mineral Resources' divestment plans come amid a difficult environment for selling iron ore mining assets. US energy firm Cliffs has failed to find a buyer for its 11mn t/yr Koolyanoobing iron ore mine in the Yilgarn after seven months of trying. It is now aims to maximise the high-grade deposits of the mine ahead of its closure within the next five years.