If the adage that “one man’s trash is another man’s treasure” is to hold true, then the eight million tonnes of rail and loading capacity at the Western Australian Port of Esperance that have suddenly been freed up are likely to cause a significant mining industry tussle.
Mineral Resources (ASX: MIN) stunned the industry last month when it revealed plans to relinquish the iron ore monopoly it had at the port under rules set in the 1990s stating that only one miner at a time could use the facility. Now, with the need for the port to find new customers – and quickly – new major players have been positioning themselves to find the key to the established treasure chest.
More on that shortly.
The decision by MinRes managing director Chris Ellison to wind down its operations at key sites including Parker Range, Carina, Windarling and Koolyanobbing marks a dramatic end of an era for both the port and the region.
Koolyanobbing, in particular, holds a storied past. Rescued from the brink of closure by MinRes with the help of the State Government after Cliffs Asia Pacific walked away from the operation, the hub has been a lifeline for many.
During its six-and-a-half-year tenure, MinRes has exported nearly 45 million tonnes of ore through Esperance, with a hefty $4.2 billion invested in running the Yilgarn operations. And yet, the short remaining mine life and significant capital costs for developing new resources have led the company to its pivotal decision.
Not surprisingly, Southern Ports chief executive officer Keith Wilks expressed concern, noting that losing such a major customer will dramatically slash the facility’s trade volume by more than half. It means that the broader Esperance community, long intertwined with iron ore activities, is bracing for the fallout.
But it has also triggered the interest of other industry giants, who are now eagerly eyeing the newly-available capacity – with dollar signs flashing in front of their faces.
In a strategic move, Gold Valley has made some decent strides in past month, having secured the rights to mine and develop the 80 million-tonne Lake Giles Ularring hematite deposit from Macarthur Minerals (ASX MIO) – a deal worth $750,000 in cash to be paid to the latter before December. Included in the deal is an offtake agreement with Glencore for 4 million tonnes of ore per annum.
Importantly for Macarthur, if a decision by Gold Valley to unlock the deposit and start expanded mining is made – possibly on the back of winning port and rail capacity – a $10 million payday and a $1 per dry metric tonne royalty awaits the company once 2 million dry tonnes have been shipped. It could reap a massive windfall of more than $70 million during the life of the mine.
The project, 50km west of Menzies, has previously been the subject of a feasibility study over its hematite and magnetite operations and now has all the mining grants and heritage clearances in place to start digging the dirt.
Macarthur, which retains ownership of its Ularring tenements, now also plans to channel funds into its Lake Giles Moonshine magnetite project. The project boasts 1.3 billion tonnes of resources, reflecting not only the of the region’s burgeoning potential, but also the possible making of the company.
Meanwhile, Gina Rinehart’s Hancock Prospecting is contemplating a $5 billion investment into a magnetite iron ore project, 120km north of Kalgoorlie, after increasing its stake to 51 per cent of the Mt Bevan play in a joint venture (JV) with Legacy Iron Ore and Hawthorn Resources. By funding further studies, Hancock can boost its holding to 70 per cent.
The Mt Bevan project promises a 25-year mine life producing 12 million tonnes annually, with exports likely to be routed through Esperance.
Legacy’s biggest shareholder, with 91.38 per cent, is the Indian Government-owned National Mineral Development Corporation (NMDC) – the nation’s biggest iron ore producer. The NMDC made the headlines last year after a much-publicised meeting in Australia was revealed between Indian Prime Minister Narendra Modi and Rinehart, to discuss, among other things, the future of the project.
And not to be left out, Juno Minerals – which was originally spun out of manganese miner Jupiter Mines in 2021 and whose senior shareholders include American private giant AMCI Holdings – holds sway over the permit-ready Mt Mason hematite deposit and the Mt Ida magnetite deposit that hosts 1.85 billion tonnes, 30km west of Menzies.
The Port of Esperance, with its master plan to reach 50 million tonnes per annum through a dual-circuit loading system, is no doubt poised for growth. In the interim, reconfiguring its conveyor belt system can boost shipments to 20 million tonnes annually.
Gold Valley’s interest in the Lake Giles Ularring hematite deposit is not just about rail and port access. The private company also previously bought the Wiluna West iron ore project for $30 million, plus royalties, to capitalise on its high-grade reserves.
The mine, with 130 million tonnes at 60 per cent iron content, is already operational, with stockpiling and shipments underway from Geraldton.
Should Gold Valley be able to secure port and rail capacity to Esperance, it is expected to look to blend the high-grade Wiluna West ore with Lake Giles Ularring’s output, creating a premium product for select steel manufacturers. The blend would be transported to Kalgoorlie and then railed to Esperance by Australia’s biggest rail freight operator, Aurizon.
Macarthur chairman Cameron McCall is particularly effusive in his thoughts on the Yilgarn region, which he sees as something mirroring the Pilbara from some 30 years ago. He is adamant the region will evolve into a new Pilbara-like hub, with Esperance potentially becoming the next Port Hedland.
As the dust settles on MinRes’ headline-making exit from the port, the industry watches keenly. And with heavyweights such as Hancock, Glencore, Gold Valley, AMCI and India’s NMDC in the fray, the battle for Esperance’s newfound capacity is well and truly on.
Will Hancock’s long-term vision for Mt Bevan secure it, or will Gold Valley, backed by Glencore’s offtake agreement, seize the moment with its ready-to-go Ularring project? Or will Juno, though its access to the deep pockets of American giant AMCI, steal the lead?
It seems the race to capitalise on Esperance’s potentially lucrative iron ore future is just beginning.
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