The cost curve forecast for Africa’s emerging iron ore sector has the potential to displace future production from higher cost operations elsewhere around the globe according to an Australian company looking to develop iron ore mines in the Congo. Speaking in Perth on the second day of the 2013 Paydirt Africa Down Under conference, Equatorial Resources’ Managing Director, John Welborn, said that while Africa historically was a land of risks and endeavour, it was set to become a force of the future in global traded iron ore. “It is now a case of ‘when’ not ‘if’ for Africa’s iron ore exports,” he said.
“Africa is the last great region in the world of undeveloped, large-scale, high grade iron ore deposits,” he said. “African iron ore projects in the pipeline have the potential to operate in the first quartile of the cash cost curve with costs well under $50/t. By 2020 Africa could host three out of the top seven lowest cost mines. The forecasts also demonstrate that these leading projects have the potential to displace future production from higher cost operators.
“The factors tipping the scale in Africa’s supply favour are not only that Africa is the host to major iron deposits and has the ability to fit below or within the cost curve and be highly competitive, there is a strong political driver in the increasing willingness of African governments to support development and drive infrastructure development and the social and financial dividends of mining success.
“Then there is the China reality. The China Iron & Steel Association has stated that within two years, China wants to import 50% of its iron ore consumption from Chinese owned mines elsewhere in the world.”
“There is a reality that Africa’s time is coming in terms of iron ore.”
The well cashed up Equatorial (A$52 million in cash) is developing two 100%-owned iron ore projects in the Republic of Congo – Badondo in the country’s northwest and which has the potential Welborn says to rival the Pilbara – and the planned 2 Mt/y low capital cost Mayoko-Moussondji project in the far southwest corner.
“Our own aspirations aside, the Congo has favourable fiscal terms for miners as the mining sector is central to the Government’s Economic Diversification Program – including uncluttering the approvals process and providing incentives for foreign mining companies.”
Mayoko-Moussondji has a JORC resource defined in February of 767 Mt at 32% Fe including a hematite resource of 102 Mt at 41% Fe. This initial hematite resource is expected, with low cost processing, to produce a clean premium grade fines product grading 64% Fe.
The Company has set a $114 million capital cost to get into initial production building to a total expenditure of $230 million by the third year for a 2 Mt/y operation. “We believe we can be in production within 15 months of final investment decision,” Welborn said. “Our operating costs will be low – around US$41/t – and there is significant potential to expand the resource.”
An upgraded resource estimate is expected before the end of this year.