Here’s something that I never thought that I’d see. Victoria is reportedly about to open its first iron ore mine: a 10 million tonne deposit in Victoria’s Nowa Nowa region, roughly three hours from Melbourne. From The AFR:
Eastern Iron, an ASX-listed company with a market capitalisation of $5 million has the permit to mine a deposit of more than 10 million tonnes Victoria’s Nowa Nowa region. This week it announced a share placement to raise up to $1 million, of which $600,000 has been completed…
The placement comes before plans to raise $35 million – $40 million of project financing to mine a projected 1 million tonnes of ore a year…
The company’s estimated cost of iron ore production of $70 to $75 a tonne and if the spot traded iron ore price remains above $US100, Mr De Ross says it “would be quite good for us”…
The projections are for an annual profit of $10 to $20 a tonne, or $10 million – $20 million a year – at least twice its current market capitalisation.
Details around the quality of the iron ore are scant, although I am guessing that it will be “wet” ore (as is the case with the state’s coal reserves), in which case the $70 to $75 a tonne cost of production could place it higher up the cost curve. If true, this could mean that it would soon become uneconomical in the event that the iron ore price sank.
A cynic may very well wonder whether the development of such a marginal project at a time when supply is rising fast is akin to ringing the bell on iron ore prices.
