Emerging iron producer Carpentaria Resources (ASX: CAP) has secured a two-stage offtake and financing agreement with Japanese blue-chip trading house Mitsui & Co to drive the development of its flagship Hawsons magnetite project, near Broken Hill in regional New South Wales.
The agreement will allow Mitsui to obtain an option to secure 2 million tonnes per year of ‘Supergrade’ (70% iron) product from Hawsons by contributing A$5.4 million to the project’s bankable feasibility study (BFS), estimated to cost A$27m.
The BFS funding will be non-dilutive to shareholders and equivalent to 20% of the study’s funding requirements.
Mitsui will pay A$5.4m to the Hawsons joint venture once the remaining BFS funding is secured by project partners Carpentaria (68.69% interest) and Pure Metals (31.31%).
The offtake stage of the agreement will be secured subject to Mitsui’s option exercise with an A$81m funding contribution for construction of the Hawsons mine.
The region’s next major mine
Carpentaria managing director Quentin Hill said the agreement with Mitsui reduces the project’s financing risk and provides a vote of confidence that Hawsons will be Broken Hill’s next major mine.
“[We have] secured 120% demand for Hawsons’ initial planned production of 10mtpa from steelmakers and trading houses across Asia and the Middle East,” he said.
“Mitsui is the first-mover with a funding commitment, and additional competition for [our] product is expected to drive development, raising the stakes for those seeking to secure Hawsons offtake.”
Mr Hill expects discussions with other blue-chip offtakers and fund managers will accelerate ahead of securing the remaining BFS funding prior to construction.
Feeding the premium iron market
Located 60km southwest of Broken Hill, Hawsons has been identified by independent analysts as the world’s leading undeveloped, high-quality, iron ore concentrate and pellet feed project.
The proposed mining operation is close to existing power and transport infrastructure and based on the low-cost, long-term supply of a high grade, ultra-low impurity product to the premium iron market.
The deposit’s soft rock magnetite necessitates a different approach to typical hard-rock magnetite mining and processing, allowing for what Carpentaria has termed “simple liberation of a product of rare quality, without complex and expensive processing methods”.
To date, the Hawsons joint venture has secured offtake intent from Formosa Plastics in Taiwan, Shagang Steel (China), Mitsubishi Corporation RtM (Japan), Bahrain Steel, Emirates Steel and Kuwait Steel (all from the Middle East) and trading house Gunvor Group.
The company said a “lengthening queue of blue-chip companies” had lined up to secure its Supergrade product, which offers the highest iron content available on the seaborne market.
In April, Hawsons was awarded Major Project Status by the Australian government in a move expected to expedite regulatory approvals and increase investor confidence.
Carpentaria Resources shares closed the day’s trading 14.67% higher at $0.086.