Venture Minerals to resume iron ore mining at Riley, offtake locked-in

Venture Minerals (ASX: VMS) is about to resume mining at its Riley iron ore project after a pre-feasibility study revealed the operation could deliver “strong returns” and an offtake partner said it would take 100% of the project’s production.

The study revealed the project would only require capital expenditure of $3.6 million to generate a post tax revenue of $31 million.

In addition to the positive feasibility study, Venture revealed its offtake partner Prosperity Steel will take 100% of the iron ore produced at Riley for the first two years.

With everything in place, Venture anticipates it will ship its first ore from Riley during the December quarter.

“This is an exciting phase for the company as it moves from explorer to producer,” Venture managing director Andrew Radonjic said.

He added the study indicates the project has an “exceptional” internal rate of return of 303%.

Riley hematite project

Venture began mining Riley back in 2014, but the operation was suspended a few months later due to the prevailing low iron ore prices.

Riley is located in Tasmania’s north-west and near sealed roads, rail and port facilities. The project has a resource of 2 million tonnes at 57% iron, and a reserve of 1.8Mt at 57% iron.

Most of the resources at the project are at or close to surface and the company plans to undertake a direct shipping ore operation.

Iron ore market

The world’s largest iron ore producer Vale was ordered at the start of this year to cease mining at its Corrego do Feijao operation after a disastrous tailings dam collapse.

Following the Corrego do Feijao catastrophe, Vale is decommissioning 10 tailings dams that had been constructed by the same method. This has caused production to stop at these locations.

It is estimated the suspended production will curb about 40Mt of iron ore from entering global markets over the next few years.

The situation, combined with a strengthening steel market, has tightened iron ore supplies – causing the commodity’s price to increase substantially over the last six months.

Iron ore reached US$124.50 per tonne in early July, before dipping back to its current level of US$87/t.

Although down on its July peak, the iron ore price is a far cry from its lows of US$63/t in late November last year and the US$39/t it was commanding at the end of 2015.

Venture’s pre-feasibility study assumes a spot iron ore price of U$90.35/t.

Spurred by this morning’s news, Venture’s share price was up 11.11% to $0.02 by midday.