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Global desires for high-grade iron ore will explode up to five times the existing market until 2050 if the metal industry is serious about the $1. 4 trillion ($2. 07 trillion) bet needed for a world in which global warming is limited to 1. 5°C above the previous level. industrial levels.
Wood Mackenzie analysts say a major change in the way the metal is produced under an ambitious 1. 5°C energy transition scenario, reducing emissions from the notoriously polluting sector by 90 percent, will lead to a sharp increase in demand for “DR-grade iron ore. “. “
A new report, Pedal to the Metal, has defined the ambitious steps the industry, responsible for around 7% of global CO2 emissions, will have to take to reach net zero targets aligned with Paris until 2050.
This would require a general change of the dominant direction of metal fabrication in fundamental blast furnaces/oxygen furnaces to the electric arc furnace and the hydrogen-driven direct discharge iron pathway for metal and iron production, respectively.
In this process, only the best grades of iron ore with few impurities in the form of “DR (direct reduction)” quality granules can be used.
The existing market for this type of iron ore is around 100-125 Mtpa. It will have to grow between five and five, five times to reach 750 Mtpa slightly understandable (roughly part of the current total maritime market) by 2050 by a 1. five°C scenario.
The reference prices of iron ore with a Fe content of 62% have been volatile in 2022, going from a high of about 163 USD/t in March to only 100 USD/t lately due to the indebtedness of the Chinese real estate market and the closures due to Covid.
However, DR-grade granules have benefited from high premiums, thanks in part to Ukraine and Russia, which account for around 30% of the market.
WoodMac says the move to a greener metal will already exceed premiums for premium iron ore in the coming decades.
“Premiums for DR granules (compared to BF granules) gained momentum in the current part of this year and are expected to end the year at 7-8 USD/t,” Malan Wu, head of uncooked metals and fabric markets at WoodMac, told Stockhead. Email.
“In our baseline situation (warming situation of 2. 3 to 2. 4 degrees), we expect this premium to expand to 15-17 USD/t in the long term as demand for uncooked green fabrics increases.
“The price gain would be even greater with an AET of 1. 5, where we see demand for DR granules will quintuple through 2050 (compared to current levels). “
Incredibly, a developing and urbanizing world and the deployment of renewable energy related to the energy transition will mean that the notoriously difficult industry to reduce will have to reduce carbon emissions while seeing a demand for metal to increase from 15% to 2. 2 Btpa.
WoodMac says between $150 billion and $200 billion will be spent on iron ore mines, 63 on new high-grade mines and 37 on existing operations.
The scrap pool will have to double to 1. 3 Gt, 52 Mt of green hydrogen will be needed yet to be announced, 2,000 GW of renewable energy (equivalent to two thirds of the existing global capacity) and 400 to 500 Mt of carbon capture and a garage will have to be installed.
USD 100 billion will have to be spent on DR pelletization, USD 350-400 billion on iron reduction, 44% on the progression of an H2 ecosystem and 56% on DRI furnaces, USD 450-500-500 billion for the global metals fleet, of which 54% on fundamental oxygen furnace upgrades, 34% on EAF capacity and 12% on generation called molten oxide electrolysis, and US$200-250 billion in CCUS.
Wu said in an interview that lately we are far behind when it comes to meeting those ambitious requirements.
“I think this is a very pressing task, we want to take it on and be in a position to invest,” he said.
“I think it’s possible, however, how are we doing right now?I think we’re definitely far from where the speed wants to be. “
“We want at least 350 million tons of new high-grade ore (beyond the recently planned source).
“So, miners want to invest between $250 billion and $300 billion, adding the creation of carbon-free mines to fight their Scope 1 and 2 emissions, creating high-grade mines, and establishing pellet plants to drive the growth of the metal. “
Green premiums of two other types will be introduced.
Along with the increase in demand and probably in the costs of high-quality iron ores, another 100 USD/t in metal costs are expected, which will increase costs by 15-20%.
This will come from the prices of emerging commodities, such as taxes and carbon offsets.
As discussed above, WoodMac expects premiums for DR-grade granules, while a carbon value of about $5/t is expected in its iron ore with a long-term 62% Fe of $80/t.
The challenges to the transition are expected to come from a number of sources.
Lack of progress in the global pipeline is one of them, as is the task of bringing the cost of generating green hydrogen down to $2/kg, the main catalyst for direct relief of green iron.
The young lifespan of blast furnace fleets in China, the world’s largest metals manufacturer with a global market share of nearly 60%, and India, which is believed to be the global expansion market for the raw material, is also a concern.
“India is one of the regions in our research where we see that its carbon emissions are going to accumulate because India is a developing economy, its metal intake will accumulate over time,” Wu said.
“And they are located to stick to the traditional direction of steelmaking in blast furnaces, as they have domestic iron ore deposits and are very close to maritime coal markets.
“And lately they also have a number of blast furnace capacity projects that are already underway. “
These can have a lifespan of 40 to 50 years, one of the reasons BHP remains optimistic about the metallurgical coal demand outlook of the blast furnace metal industry in the coming decades.
Wu said one way to reduce metal emissions would be to use hydrogen to upgrade pulverized coal to inject it into the blast furnace, noting that India also has the ambition to produce green hydrogen on a giant advertising scale.
She describes China as “the elephant in the room. “
“China’s carbon emissions will naturally be minimized because its demand and production are shrinking and (the economy) is maturing and this will reduce about 50 percent of existing carbon emissions,” Wu said.
“But that’s not enough for China to succeed at net zero, the industry wants to reduce those carbon emissions by more than 90 percent.
“China’s blast furnaces still have a long way to go.
“I think they still have at least 15 to 20 years to install a lot of their blast furnaces. Therefore, it will count on the seriousness of the government in terms of decarbonizing the metal industry and the government that will be given to the industry. “
Overall, Wu says, iron ore miners have made big commitments to reduce Scope 1 and 2 fees, such as switching trains and trucks to electric power and hydrogen from diesel, and employing herbal fuel instead of sending fuel to marine fleets to create green energy. Runners.
But a great deal of investment and willingness will be to meet the needs of a net-zero world, with most emissions on the metal side where the answers are most distant.
Mining giants are still willing to invest billions in substandard iron ore sources, either to open up new mining fronts or for their vast operations in the Pilbara. The market, for now, remains intact.
They are still funded through China, with the world’s largest steelmaker, Baowu, making an investment of more than a billion dollars in the structure of Mineral Resources’ (ASX: MIN) 35 Mtpa Onslow iron ore allocation along with a consortium of foreign corporations and Rio Tinto (ASX: RIO) 25 Mtpa Western Range replacement mine at its Paraburdoo hub.
Onslow, whose 60% is owned by MinRes, which is part of apijv and once regarded as the sleeping giant of the Pilbara iron ore industry, is a particularly attractive progression these days.
While its product will be pegged to the value of the 58% reduction index (still largely provided by Australian miners, adding Fortescue Metals Group (ASX:FMG)), it is still a market for this type of ore from Chinese blast furnaces. MinRes claims at just 32 USD/t FOB, prices will be low enough to offer wide margins during the cycle.
Some analysts that Australia’s major iron ore manufacturers have fallen asleep at the wheel, with our industry at a disadvantage compared to manufacturers in Brazil, America and Africa.
But iron ore miners are beginning to recognize the importance of taking over a high-grade percentage of the market.
Fortescue plans to open its 22 Mtpa Iron Bridge magnetite mine next year. Plagued by delays and cost overruns, green hydrogen developer FMG believes premiums for its 68% will make the company attractive.
MinRes plans to convert its high-cost Yilgarn iron ore center into a magnetite playground, while Gina Rinehart and her Hancock Prospecting have revived studies on a magnetite allocation in pilbara and taken the lead in a joint venture for a locked magnetite assignment with Junior. Inherited resources of iron ore and hawthorn.
BHP tried in vain years ago to turn its Pilbara hematite with 62% Fe into a high-end product.
But Rio Tinto and BHP remain, by the way, two of the largest manufacturers in the ASX, but only for their non-core operations of Iron Ore Company of Canada and Samarco (a joint venture with Vale in Brazil), respectively.
Private operations also abound, adding citic’s Sino Iron assignment and Gindalbie Metals’ Karara iron ore mine in WA, and SIMEC Mining in South Australia, owned through Sanjeev Gupta’s GFG Alliance and component of Whyalla’s metal source chain, where the company will use its own ore to expand a green metals industry.
Looking for natural exposure from the game manufacturer in the ASX?Here are some with an eye on the price.
Note: For this list, we are only corporations planning to produce magnetite granules or concentrates, and not high-quality DSOs like Rio’s Simandou or Mt Gibson’s Koolan Island.
Champion Iron is the largest high-grade specialist in ASX, generating 7. 5 Mtpa of 66. 2% and 67. 5% more DRI-grade iron ore from its Bloom Lake complex in Quebec, Canada.
His origin story was a countercyclical move through Champion and his Australian figurehead Michael O’Keefe, with a reputation for being part of the Riversdale Mining team that made a speck by selling Mozambique’s unfortunate coal assets to Rio Tinto.
Champion bought Bloom Lake, which runs on renewable hydropower, for just $10. 5 million versus Cliffs in 2016 at the peak of mining when iron ore was in the toilet.
It is now a $2700 million company, up 2500% in the six years since the Bloom Lake deal was signed.
The company claims that its 66. 2% concentrate reduces emissions in the steelmaking process in blast furnaces, while its 67. 5% > pellet feed concentrate can be used in electric arc furnaces that require steel scrap as a source of force, emissions 50% less intense than blast furnaces.
Champion Iron leveraged its good fortune to fund its Bloom Lake II development, expanding production to 15 Mtpa, shipping its first product from the expansion in May and exporting a record 2. 28 Mt in the first quarter of fiscal 23.
It carries out the production of an iron ore product in super premium granules at 69%. The company also has expansion features for projects along Labrador Trough.
Grange, the undisputed leader in Australia’s high-grade indexed space, owns the Savage River mine in Tasmania, from where iron ore has been produced for more than years.
Grange, largely owned by Chinese investors, is small but very profitable, posting a profit of $132. 2 million in the first part of 2022 despite the drop in iron ore costs well below records for the first part of 2021.
The premium presented by the Grange Balines when jumping is more than ridiculous.
In the June 2021 quarter, when iron ore peaked, Grange ore was selling at US$287. 15/t, generating a margin of almost AUD$300 for each tonne of iron ore shipped.
Since then, costs have declined particularly and energy costs have taken its opex to $193. 44/t and $122. 72/t respectively. These remain very high margins for a junior company, with $369. 47 million in cash and $8. 52 million in industry receivables in Grange’s bank account as of June 30.
The company now ASX 300 sits on a lot of money and will pay regular dividends to regular shareholders, adding a special 10-cent split on Christmas last year and a 2-cent interim dividend in August.
Grange plans to spend more time at Savage River, completing a PFS in December that showed it can simply triple the “green granule production” from ~2 Mtpa to ~6 Mtpa over 10 years by moving from open-pit mine to underground excavation methods.
Grange has a momentary expansion option on the 5Mtpa Southdown magnetite allocation near Albany in the Great South region of WA, where a PFS is being performed.
A decade old placed a prohibitive value of US$2. 9 billion on a larger 10 Mtpa progression on Southdown.
Few corporations are as passionate about producing high-grade iron ore and low-carbon metals as Magnetite Mines.
Chairman Mark Eames, an iron ore executive whose career has included stints at BHP, Rio, Glencore and X-Strata, even wrote a white paper last year on the industry.
A pre-feasibility study at its Razorback iron ore mine in South Australia last year set a value of up to $675 million for its case to be approved, involving the production of 3Mtpa of iron ore at 68% consistent with the year in a 23-year-old mine.
This capital expenditure estimate is 3 times lower than the number produced through the previous management of the company.
One such energy saving could be a potential ESG advantage for the junior iron ore aspirant, who wants to take advantage of work done by the South Australian government to shift most of its electricity source from the grid to wind power.
By connecting to the grid via a transmission line, MGT hopes to save abundant sums it would otherwise have spent on a standalone power plant and earn an ESG premium by using renewable energy to strain its processing operations.
But it goes further, as new CEO Tim Dobson pronounced last week that the company would consider increasing its initial scale to five Mtpa in response to growing demand for high-grade iron ore, which is expected to increase during the project. more than two decades of useful life.
“By increasing its focus, the company is responding to direct evidence of the conversion of market situations related to the decarbonization needs of the metal industry. The company looked forward to this replacement and strengthened its team accordingly,” Eames said.
“Razorback’s existing ore reserve represents only 11% of the company’s mineral resources. This strategic shift to a larger scale of initial production better aligns the allocation with the potential of the resource, while leveraging the abundant existing infrastructure that will follow a pragmatic and staged progression timeline. Approach.
“The company is committed to returning the highest price imaginable to shareholders, and this strategic update is fully aligned with that goal. “
Another STOCK indexed on the ASX still overseas, Magnum Mining and Exploration holds the Buena Vista Iron Ore assignment in Nevada in the United States.
Magnum’s plan is to go beyond iron ore mining to sell “green” cast iron and hot cast iron products to consumers in the United States and Asia.
The company reached an agreement to negotiate the lien with Anglo American in office since mid-2021, but at the end of last year, the deadline to enter into the agreement was extinguished to November 30, 2022, in the context of the evolution of the scope of Buena Vista’s assignment of a magnetite concentrate mine to a “green iron” progression.
Iron Road owns the Central Eyre Iron allocation near Warramboo in South Australia.
Recently, he was one of the proponents of a new “green” export facility at Cape Hardy in the SA region, however, news about the allocation of such plans has been relatively rare.
A 2015 “optimization” study estimated a total cost of $4. 6 billion (including a previous extraction of $570 million) to expand a 24 Mtpa mine generating 67% with few impurities, a capital investment that even BHP and Rio would struggle to find the cash. for this type of production rate.
In 2017, this amount dropped to $3700 million and then to $1740 million in 2019 by reducing its target production rate to 12 Mtpa, replacing rail with road trains, and reducing energy needs.
South Australia has a history of producing magnetite iron ore, with GFG Alliance, owner of Whyalla Steelworks, managing the Simec Mining Middleback Ranges mine site about 60 km from the metallurgical city.
Most of the 1. 3 Mtpa of granules are supplied to the Whyalla metal plant, and about 10 Mtpa of hematite ore are shipped to Asian customers.
Formerly known as Carpentaria Resources, Hawsons owns the site of the same name near the historic mining town of Broken Hill in New South Wales, birthplace of BHP.
Hawsons has a probable initial reserve of 755 Mt at 14. 7% quality Davis Tube Recovery which it believes can move to 111 Mt of 70% supergrade magnetite concentrate, which it markets as a “green steel” product.
A PFS published in 2017 estimates that it would charge US$1. 4 billion to deliver a 10 Mtpa shipping allowance at an all-inclusive FOB charge of US$48. 03/dmt. But Hawsons is now looking at the option of expanding this scale to 20 Mtpa due to demand for greener iron ore products.
It remains to be seen whether this will be feasible, with a BFS on the way. The company has updated this year its measured, indicated and inferred resource base of 400Mt of ore adding 3. 06Bt to DTR 13. 1% to 484Mt adding 3. 95Bt in DTR 12. 2%.
Hawsons is one of the few iron ore companies to profit from an inventory market value in 2022, up 167. 65% year-to-date.
Strike opened the new Paulsens East mine in pilbara earlier this year.
With a resource of 9. 6 Mt with a decent grade of 61. 1% iron and a run rate of 1. 5 Mtpa consisting of a 75-25 split of 62% pieces and 59% fine, Paulsens East is a popular rate for a local junior iron ore company.
The company announced the first in August, but is reassessing the task in light of a slowdown in iron ore prices to 62% Fe, which fell from about 160 USD/t in March to about 100 USD/t today.
Strike’s big bet on high quality is in Peru at its Apurimac operations, where it began exporting small quantities of around 65% of DSO products last year, and made its first shipment in August 2021.
Negotiations are underway lately with a South American metallurgical plant in the process of shipping, but Strike will want current capital to finance production.
Apurimac’s largest magnetite resource 269 Mt of iron ore at 57. 3%, which, according to studies dating back to 2010, can produce only about 20 Mtpa of 66% concentrate at a structure load of US$2. 6 to US$2. 9 billion and US operating prices. UU. $ 17 to US$ 20 / t.
Given the age of this study, Strike, which last year incorporated its lithium and graphite assets into Float Lithium Energy (ASX: LEL), is comparing features at the next level of paints and studies after a review through Ausenco last year.
One of the spaces in which he hopes to make savings is the Peruvian government’s structure of the $4. 6 billion, 577-kilometer-long Andahuaylas railway that would link the mine to the port, which is now expected to begin operations in early 2023.
Other corporations with high-quality allocations on their books (along with DSO hematite resources in many cases) come with Akora Resources (ASX: AKO) and Juno Minerals (ASX: JNO) and Macarthur Minerals (ASX: MIO), while Arrow Minerals (ASX: AMD) recently took over the Simandou North allocation in Guinea, exploring for 65% hematite at the proposed 200Mtpa Simandou mine in the south.
At Stockhead, we say things as they are. Although Magnetite Mines and Arrow Minerals are Stockhead advertisers, they sponsored this article.
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