High-grade magnetite is intrinsic to our clean energy transition
\nThe material is key to lowering CO2 levels at the industrial level
\nCyclone Metals has the largest undeveloped magnetite deposit in the world<\/p>\n
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A few little birdies on the back 9 a while ago told this Stockhead <\/em>that stable, almost institutional hematite supply, largely from WA\u2019s Pilbara region, would eventually have to make some space for magnetite ores that can be processed into higher grades \u2013 vital to cleaner smelting processes in steelmaking.<\/p>\n Responsible for ~8% of the world\u2019s CO2 emissions, the majority of steel production is still coal-based and commonly relies on low-grade hematite iron ore somewhere between the 55-62 percentile range.<\/p>\n It\u2019s the +65% Fe grades that are required to reduce carbon emissions, and they come from magnetite deposits that can be processed into pellets and utilised in direct reduced iron (DRI) manufactured by using natural gas (and hopefully soon to be) hydrogen to extract the oxygen from high-quality ores.<\/p>\n Rightly or wrongly, the skeptics are still present when it comes to utilising higher-capex magnetite in steel production.<\/p>\n \u201cThe transition away from coal-based steel-making is a reality, but it will take some time and there remain significant uncertainties,\u201d Rio\u2019s head of steel decarbonisation Simon Farry told Bloomberg<\/em> earlier this week.<\/p>\n However, that clock is ticking and demand for high-grade ore is on a significant upward trend.<\/p>\n Wood Mackenzie anticipates the deficit in high-grade iron ore supply could reach up to 200Mtpa by 2050. To put this into perspective, that\u2019s about one-fifth of China\u2019s current annual iron ore imports.<\/p>\n The prevailing wisdom within the sector is that magnetite concentrates have now become more economically attractive, driven by an escalating imposition of CO2 taxes and inherently elevated energy costs due to ongoing market and geopolitical machinations.<\/p>\n Yes, they require more capex, making them a less preferred option in the short term, but that\u2019s all changing though as we transition into our greener, cleaner world.<\/p>\n China, Europe and the US are all pushing the envelope for high-grade Fe pellets as we transition to lower carbon-emitting industrial practices.<\/p>\n \u201cThe return of European blast furnace capacity in 2023 (13Mt announced so far) along with improving Chinese demand amid sintering restrictions in some parts of the country back our view that pellet premiums have bottomed and are likely to rise this year,\u201d say Macquarie analysts.<\/p>\n \u201cAside from FMG\u2019s Iron Bridge project which will produce high grade (67% Fe) iron ore suitable for pelletising, which is scheduled to come online this quarter, there are few relatively advanced pellet feed projects globally.\u201d<\/p>\n Recently, however, FMG downsized its production forecast from 7Mtpa to 5Mtpa, opening the gap wider for entrants to the market.<\/p>\n \u00a0<\/p>\n Source: Macquarie.<\/p>\n \u00a0<\/p>\n China is bucking the forecasts by keeping its iron ore imports steady and even improving on monthly shipments compared to the same time last year, say analysts at Fitch, citing that Fe stockpiles are weaker in the Middle Kingdom than predicted.<\/p>\n \u201cDuring January to August of 2023, mainland Chinese imports of iron ore surged by 7.4% y-o-y to a record high of 775.7Mt. Total iron ore inventory at mainland Chinese ports as of September 15 were 11.4kt, compared to 13.4kt on January 6 2023,\u201d Fitch says.<\/p>\n \u201cDespite mainland China\u2019s uneven economic growth and a still failing property sector, blast furnace steel production and thus iron ore demand have shown a defiance of all odds, through support from non-property sectors including shipping, machinery, automakers and infrastructure.<\/p>\n \u201cFrom January to August 2023, China produced 712.93mt of crude steel, up 2.6% from the same period in 2022. We expect some more upside to iron ore prices in Q4 2023 ahead of the winter holidays as steel mills continue restocking.\u201d<\/p>\n Favourable sentiment in the futures market is bolstering iron ore prices in both Singapore and China\u2019s Dalian exchange. Fitch remains optimistic about the potential for the Chinese stimulus to reignite activity in the property sector.<\/p>\n The green steel push and Chinese consumption is increasing demand long term and that momentum has spurred the Australian iron ore sector to engage proactively in the emerging high-quality iron ore market, with a focus on magnetite both domestically and abroad.<\/p>\n DID YOU KNOW?<\/strong> Honey bees, homing pigeons, dolphins and sharks all contain magnetite in their brains, forming internal compasses that allow them to navigate over long distances<\/a>.<\/p>\n \u00a0<\/p>\n Here\u2019s a few ASX small caps that are looking to chip into the more carbon-friendly steelmaking supply chain:<\/em><\/p>\n Cyclone Metals\u2019 (ASX:CLE)<\/strong><\/a> Block 103 magnetite project in Canada can produce 69.5% Fe concentrate, and at a whopping 7.2 BILLION<\/strong> tonnes is a monstrous undeveloped magnetite resource<\/a>.<\/p>\n The project is nestled in the Labrador Trough, one of the largest iron ore belts in the world which hosts 99% of Canada\u2019s iron ore production and the only one which benefits from open access rail and port infrastructure.<\/p>\n Extensive metallurgical testwork has been conducted by the company, recently demonstrating a capability to produce high-quality Fe magnetite concentrate.<\/p>\n In September, CLE embarked on an extensive program of comprehensive metallurgical testing using bulk sediment samples, aimed at demonstrating the seamless production of a premium 69.5% Fe magnetite concentrate.<\/p>\n The company is confident that it can showcase its magnetite concentrate to steel clients as early as February 2024.<\/p>\n CLE says there\u2019s also early indications that direct shipping ores (DSO) could exist at Block 103 as it\u2019s adjacent to Tata Steel\u2019s own 2Mtpa DSO operation.<\/p>\n \u201cExploration activities are planned for Q2 2024 to identify and quantify this opportunity, which could deliver early cash flows for a modest capex outlay,\u201d the company said.<\/p>\n In South Australia, Magnetite Mines (ASX:MGT)<\/strong><\/a> is looking to bump into global DRI demand with its Razorback project that\u2019s gathering steam.<\/p>\n The company says it\u2019s receiving increasing interest from steelmakers, commodity traders and private equity groups to form a JV for the development of the project where it plans to produce 68.5% DR-grade iron ore.<\/p>\n MGT aims to produce 5Mtpa from its 6 billion tonne iron ore project and recently rattled the tin for $6.2m to finalise its mining lease proposal with the state government as well as support the completion of engineering work and other capital costs.<\/p>\n Iron Road (ASX:IRD)<\/strong><\/a> is looking at developing a 12Mtpa magnetite project at its Central Eyre Iron project \u2013 also in South Australia \u2013 where a proposed green hydrogen and ammonia development at nearby Cape Hardy could potentially complement production.<\/p>\n Meanwhile, Hawsons Iron (ASX:HIO)<\/strong><\/a> \u00a0is in pursuit of magnetite in WA, with Stage 2 exploration analysis showing prospective, near-surface magnetite mineralisation at its namesake project.<\/p>\n Also in WA, Creasy-backed\u00a0 CZR Resources (ASX:CZR)<\/strong><\/a> has found potential for its 450-880Mt Ashburton magnetite project, an 11km long, outcropping magnetite schist only 20km from its Robe Mesa flagship.<\/p>\n A recent review resulted in an Exploration Target of 450Mt \u2013 880Mt at 24-30% Fe, generating a magnetite concentrate of 65-68% Fe at a 25-30% mass yield. <\/span>\u00a0<\/p>\n At Stockhead we tell it like it is. While Cyclone Metals is a Stockhead advertiser, they did not sponsor this article.<\/em><\/p>\n <\/span><\/p>\n The post Sub-par supply is driving magnetite prices up. Which ASX small caps are killing it with their iron game?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Buoyant Chinese consumption<\/h2>\n
Stronger for longer<\/h2>\n
\n\u00a0<\/p>\nCLE, CZR, IRD, HIO, MGT share price charts<\/strong><\/h2>\n\n