Iron Ore

Resource figures are current as at 30 December 2015. Commentary is current as of December 2016.

Iron (Fe) is a metallic element that constitutes about 5.6% by weight of the Earth's crust and is the fourth most abundant element in the crust. Iron ores are rocks from which metallic iron can be economically extracted. The principal iron ores contain hematite (Fe2O3) and magnetite (Fe3O4).

Hematite is an iron oxide mineral. It is non-magnetic and has colour variations ranging from steel silver to reddish brown. Pure hematite contains 69.9% Fe. It has been the dominant iron ore mined in Australia since the early 1960s. Approximately 96% of Australia's iron ore exports are high-grade hematite, most of which has been mined from deposits in the Hamersley province of Western Australia (WA). The Brockman Iron Formation in the Hamersley province is the most significant host for high-grade hematite iron ore deposit.

Magnetite is an iron oxide mineral that is generally black in colour and highly magnetic; the latter property aiding in the beneficiation of magnetite ores. Magnetite contains 72.4% iron, which is higher than hematite, but the presence of impurities usually results in magnetite ores having lower ore grade (generally 20-30% Fe) than hematite ores, making it more costly to produce concentrate for steel smelters. Magnetite mining is an emerging industry in Australia with large deposits, including Balmoral's George Palmer deposit, being developed in the Pilbara region of WA.

Australia's largest magnetite project, Sino Iron, is focusing on ramping up its production after commissioning the final two of six concentrator lines. The country's other magnetite operation sites are Karara in the mid-west of WA and the established Savage River magnetite mine in northwest Tasmania. Karara reported production of approximately 1.6 million wet metric tonnes (Mwmt) of magnetite concentrate during the June 2016 quarter. Savage River mine maintained its previous year's production of magnetite concentrate at 2.6 million dry metric tonnes (dmt). Due to the refurbishment of autogenous mills, the company's pellet plant at Port Latta reported an increase in iron ore pellet production from 2.3 Mt to 2.5 Mt over the same period.

Mining and processing hematite and magnetite ores

High-grade hematite ore is referred to as direct shipping ore (DSO) because, once mined, the ore goes through a relatively simple crushing and screening process before being exported for use in steel making. Australia's hematite DSO from the Hamersley province averages from 56% to 62% iron. Like hematite ores, magnetite ores require initial crushing and screening but also undergo a second stage of processing that exploits the magnetic properties of the ore to produce a concentrate. Further processing of magnetite involves agglomeration1 and thermal treatment of the concentrate to produce pellets which can be used directly in blast furnaces or in direct reduction steel-making plants. The pellets contain 65% to 70% iron, which is a higher grade than the hematite DSO currently being exported from the Hamersley province. Additionally, when compared to hematite DSO, the magnetite pellets contain lower levels of impurities, such as phosphorous, sulphur and aluminium. Thus, magnetite pellets are a premium product and attract higher prices from steel makers, offsetting the higher costs of production.

Resources

Australia's iron ore reserves and resources are in both hematite and magnetite ores. Because of the high average grades (% Fe) of hematite ores when compared to the average grades for magnetite ores, it is necessary to report national resources in terms of contained iron as well as bulk iron ore. Thus, the national resource estimates for iron ore (Table 1) are reported in two categories, namely:

  • Million tonnes of iron ore, and
  • Million tonnes of contained iron.

In 2015, Australia's Economic Demonstrated Resources (EDR) of iron ore decreased from 2014 levels by 5% to 51 545 Mt with a corresponding 3% decrease in EDR of contained iron to 23 985 Mt (Table 1). Of note was the 12% decrease in EDR at magnetite deposits. Seaborne iron ore supply has exceeded market demand resulting in significant downturns of the iron ore price since 2014. As the volatility of the iron ore price continues, exploration programs are either being deferred or kept to a minimum by explorers and developers. Established miners have confined exploration activities to near mine and are selectively developing deposits that only require low-cost and low-capital expenditures. Overall, this trend has been demonstrated by the decrease in Australia's EDR of iron ore in 2015.  Paramarginal Resources of iron ore were estimated at 7967 Mt with 2796 Mt of contained iron and Inferred Resources were estimated at 86 429 Mt of iron ore with 38 562 Mt of contained iron (Table 1).

Commodity Units Australia World
JORC Reserves (a)
(% of Accessible EDR)
Demonstrated ResourcesInferred Resources (c)Accessible EDR (d) Mine Production 2015 (e) Economic Resources 2015 (f) Mine production 2015 (g)
Economic (EDR) (b) Subeconomic
Para-marginalSub-marginal
Iron OreMt 21 903 (42%) 51 545 7 967 1 510 86 429 51 545 811 183 000 3300
Contained IronMt Fe 10 244 (43%) 23 985 2 796 515 38 562 23 985 502 85 000
Table 1: Iron ore and contained iron JORC Reserve and Resources

Based on 2015 production levels and Accessible EDR (AEDR; Table 1), iron ore in Australia has a resource life of 60 years. Figure 1 shows the proportion of iron ore EDR in each state and the Northern Territory with Western Australia clearly dominating with 89% of the nation's economic endowment.

Figure 1: Proportion of Iron Ore EDR in states and the Northern Territory.

Figure 1: Proportion of iron ore EDR in Australian states and the Northern Territory.

Maps showing locations of Australian in Situ Iron Ore Resources (Sheet 1: Hematite; Sheet 2: Magnetite), 2012 are available for free download.

Accessible Economic Demonstrated Resources (AEDR)

Australia's AEDR of iron ore also totals 51 545 Mt (Table 1) as all of Australia's iron ore deposits with an EDR are regarded as accessible. Thus both AEDR and EDR during the 2015 period decreased to 5% from the previous 2014 assessment period; a reflection of the current trend of low iron ore prices.

Resource decreases were mostly the result of project cancellations and the cessation of higher cost production operations. Project deposits that increased reserves and resources during the 2015 assessment period included Rio Tinto's Brockman 2 at Hamersley Iron, Oxbow and Billiard South at Yandicoogina and Deposit F at West Angela. BHP Billiton's resource increases to 27 400 Mt were generated from infill drilling of 22 deposits and from new resources at 19 deposits including Brockman, Chanel Iron Deposits and Marra Mamba.

Fortescue's Cloudbreak and Christmas Creek deposits also recorded an increase in reserves to 2400 Mt during the assessment period. Other deposits that reported increase in resources include Atlas Iron's Runway, Shark Gully and Split Rock deposits at Corunna Downs, and Mt Gibson Iron's Iron Hill (Extension Hill South project) and Shine deposits.

JORC Reserves

Total Australian Joint Ore Reserves Committee (JORC) Code Reserves of iron ore were estimated to be 21 903 Mt in 2015, representing 42% of AEDR (Table 1). JORC Ore Reserves represent a higher level of economic, technical and legal certainty than JORC Mineral Resources. Deposits with Ore Reserves have, at a minimum, a pre-feasibility study indicating a reasonable expectation of being mined within the development timeframe, while Mineral Resources are of potential value with reasonable prospects for eventual economic extraction over a longer timeframe. The JORC Code Reserves of contained iron total 10 244 Mt, or 43% of the EDR of contained iron (Table 1). However, not all mining companies are publicly listed so unreported reserves and resources are not included in these figures. Based on publicly available data, JORC Code Reserves are sufficient for approximately 25 years at the current (2015) rate of mine production.

Exploration expenditure

Australian Bureau of Statistics (ABS) Mineral and Petroleum Exploration data indicate that mineral exploration expenditure in Australia for 2015 totalled $1437 million, a 22% decrease on the $1837 million spent in 2014, consistent with the current economic conditions. About $295 million was spent on iron ore exploration in WA, which represented 93% of Australia's total iron ore exploration expenditure. Western Australia also accounted for 35% of the total mineral exploration expenditure in Australia during 2015 at around $844 million. Iron ore exploration expenditure in South Australia was $6.1 million, and $0.2 million for Tasmania.

Production

Australia's total production of iron ore for 2015 was 811 Mt with WA producing 799 Mt, or 98.5% of overall production. South Australia had a slight decrease in its iron ore production from approximately 11.3 Mt in 2014 to 9 Mt in 2015, representing 1% of Australia's total iron ore production. The Northern Territory and Tasmania represent less than 1% of the national total of iron ore production.

The Office of the Chief Economist (OCE) reported Australia's iron ore exports during 2015 as 767 Mt, a 7% increase on the 2014 figure of approximately 717 Mt. The OCE has forecast a 10% increase in iron ore exports to approximately 846 Mt for the 2016 financial year. Planned expansion projects by some of Australia's major producers, such as Rio Tinto along with the continuing production ramp up of Hancock Prospecting's Roy Hill project, will support the projected production increase. Australia exports iron ore to countries including China (~81%), Japan (~9%) and the Republic of Korea (~7%). The OCE forecasts a global increase in steel consumption to 1.6 billion tonnes by 2020, mainly generated from developing countries such as China and India.

World Ranking

Australia has the world's largest iron ore EDR with 28% at 51 545 Mt, followed by Russia (14%), with Brazil and China sharing equal third spot (13%). In terms of contained iron, Australia has 28% of world EDR, while Russia has the second largest EDR with 16%.

Worldwide Production Trends

Hematite ore dominates world production and is sourced mainly from Australia and Brazil. China dominated in 2015 with 42% (1380 Mt) of world production of iron ore, followed by Australia with 25% (811 Mt) and Brazil with 13% (428 Mt). Magnetite ore has established a presence in world production and contributes to the increase in Australia's EDR of iron ore, mainly from established operations such as Savage River in Tasmania and from other magnetite resource deposits in WA and SA, representing 41% of Australia's total EDR of iron ore.

Industry Developments

The dynamics of the current iron ore market have led to greater economic instability for some companies in the industry, evidenced by the current trend of some mining operations and project developments towards suspension. Under these circumstances, Geoscience Australia notes that some of the operations and project developments that are discussed in this section may have been impacted.

Western Australia

The Chichester and Solomon hubs operated by Fortescue Metals Group (FMG) produced 169.4 Mt of iron ore in the year ending 30 June 2016 with plans to maintain this level of production through the 2016-17 financial year. The Chichester hub (at Chichester Ranges) comprises the Cloudbreak and Christmas Creek mines whilst the Solomon hub (located in the Hamersley Ranges) includes the Firetail and Kings Valley mines. At 30 June 2016, FMG's total iron ore JORC Reserves inventory from its Chichester and Solomon operations was estimated at 2173 Mt at 57.2% Fe.

Atlas Iron Ltd's Corunna Downs project has initiated a pre-feasibility study for a low-cost iron ore mine. The company stated that their near-term mineral resource exploration and development will be focused on brownfield projects such as the commencement of pre-development studies at Corunna Downs. The project updated its JORC Resources in May 2015, highlighting a maiden Inferred Resource for its Glen Herring deposit of 14 Mt at 57.3% Fe, bringing the project's total JORC Resources to approximately 65 Mt at 57.3% Fe.

Mount Gibson Iron Ltd plans to extend its Extension Hill hematite mine in the mid-western region of WA through development of the adjacent Iron Hill deposit. Both sites are approximately 62 km southwest of the town of Paynes Find in the Yilgarn region. The company anticipates that the mineral resource at Iron Hill has the potential to support an extended operation at the Extension Hill mine. Iron Hill has an estimated JORC Indicated and Inferred Resource of approximately 8.80 Mt at average grade of 58.3% Fe.

Since the commencement of its magnetite concentrate production in 2012, the Karara project has undertaken some operational remedial action to improve production efficiency. Hence Gindalbie Metals Ltd's 2015 annual report has noted the continuing improvement of the Karara operations during the reporting period. Accordingly, during the 2014-15 financial year, the Karara project successfully exported combined magnetite concentrate and hematite DSO of approximately 9.51 Mwmt, a 53% increase from previous financial year.

The Mount Alexander project is approximately 260 km southwest of the town of Karratha in the West Pilbara region of WA. Zenith Minerals Ltd's 2015 annual report gave an updated JORC Inferred Resource estimate for the Mount Alexander deposit, with the new Inferred Resource of 565.7 Mt at 30% Fe being combined resource estimates for the central and southwest areas of the deposit. Additionally, Zenith has reported a maiden JORC Inferred Resource of 25.9 Mt at 22.7% Fe for the Mount Alexander West Banded Iron Formation (BIF) deposit.

The Mount Bevan Iron Ore project is Legacy Iron Ore Ltd's major iron ore joint-venture project with Hawthorn Resources Ltd. Legacy's 2016 annual report re-announced the previous year's JORC Resources of 1170 Mt at 34.9% iron. The company also reported the completion of additional exploration work (over the southern part of Western, Meso and Eastern BIFs) targeting DSO iron ore mineralization within the project area. The Mount Bevan project is located approximately 95 km northwest of Menzies in the Yilgarn region.

As part of the Red Hill Iron Ltd exploration programme in 2015, the Red Hill Iron Ore Joint Venture (RHIOJV) reported the completion of the 5626 m drilling of numerous deposits at the RHIOJV project, which includes Kens Bore, Red Hill Creek West, Trixie and Swearengen. Included in the drilling targets was channel iron mineralisation at the Trixie and Swearengen prospects, with results showing some significant intersections, including a 16 m @ 56.7% Fe result from surface at Trixie. The company states that recent and previous drilling data were modelled for resource estimates with results to be utilised in mine planning and optimisation project work.

BC Iron Ltd's Iron Valley project has reported total resources as at 30 June 2016 of 238.7 Mt at 58.4% Fe and Ore Reserves of 123.2 Mt @ average grade of 58.8% Fe. Iron Valley is fully owned by BC Iron, with Mineral Resources Ltd (MIN) mining and purchasing its DSO products (fines and lump).  MIN transports the ore through a truck haulage operation to Utah Point in Port Hedland. The project reported a total shipment of 2.83 million dry metric tonnes during the 2014-15 financial year.

The Nullagine Joint Venture (NJV) by BC Iron Ltd and Fortescue Metals Group reported that the project produced approximately 5.19 Mwmt of its Bonnie Fines product during the 2015 financial period. The product is transported via haul road to the Christmas Creek rail loadout facility, where the ore is loaded onto trains for transport 300 km to Fortescue's Herb Elliot Port at Port Hedland to be exported to the company's offshore customers. As at 30 June 2015, NJV reported estimated JORC Resource of approximately 91.9 Mt CID at an average grade of 52.8% iron.

The Ophthalmia project is Brockman Mining Ltd's second major iron ore project in the Pilbara region of WA. Opthalmia comprises several iron ore deposits, namely Coondiner (includes Pallas and Castor), Sirius and Kalgan Creek. A pre-feasibility study was initiated in 2014 but has been halted until infrastructure issues are resolved for the company's Marillana project. As reported in the company's 2015 annual report, the resources for the Ophthalmia deposits have remained the same at341 Mt at an average grade of approximately 59.3% Fe. The Ophthalmia project is approximately 80 km southeast of the company's principal project, the Marillana Iron project, in the east Pilbara.

Rio Tinto Ltd's Pilbara Iron Ore mines expansion projects supported the 10% increase of its annual production from the preceding year to 309.9 Mt in 2015. Supporting the increase are projects with increased reserves and resources which include Hamersley Iron's Brockman 2 with 93 Mt at 62.3% Fe, Yandicoogina with 642 Mt at 58.5% Fe, Namuldi with 170 Mt at 62.4% Fe and Silvergrass East with 157 Mt at 61.7% Fe. The Robe River Joint Venture project, West Angelas, also contributed to the reserves increase with 209 Mt at 61.4% Fe. For the same period, Rio's global iron ore production has increased by 11% to 327.6 Mt per annum and is expected to reach about 350 Mt in 2016.

BHP Billiton Ltd's Western Australia Iron Ore (WAIO) operation reported a 2% production increase to 257 Mt during the 2015-16 financial year. WAIO is expect to maintain its capacity guidance between 265 and 275 Mt for the 2016-17 financial year, but is anticipated to rise to 290 Mt over time from an increase in operational efficiency of its integrated supply system and corresponding additional capacity from its Jimblebar mining hub as it ramps up production. WAIO has increased its Ore Reserves during the 2016 financial year with a major increase in Brockman ore to 2600 Mt @ 61.9% Fe, resulting from infill drilling of 22 deposits.

Development activities at the Wiluna West JWD hematite ore deposit have been halted and the project has been put on care and maintenance until the iron ore market improves. The project owner, GWR Group Ltd, notes in the 2015 annual report that the project's estimated JORC Reserves are approximately 69.2 Mt at 60.3% Fe.

South Australia

Iron Road Ltd's Central Eyre Iron project (CEIP) has reported a 78% increase in the project's JORC Reserves of 3681 Mt at average grade of 15% Fe. The CEIP project has total JORC Resources of 4510 Mt at an average grade of 16% Fe. CEIP is located on the Eyre Peninsula of South Australia.

Magnetite Mines Ltd has reported the metallurgical test results for bulk concentrate production work at the company's Razorback deposits, part of the Mawson iron project. The company states that the test work has successfully produced greater than 68% Fe and sample concentrate has been sent to prospective steel mill customers in China and Taiwan. An important achievement for the Mawson project was the signing of agreements  between Magnetite Mines and with the project's prospective customers. The project's magnetite JORC Resources are approximately 2732 Mt at 18.2% Fe.

Havilah Resources Ltd's 2015 annual report stated that low-key work will continue on the Maldorky iron ore project.  The project's mining lease application process is in progress with public comments under consideration by the SA Department of State Development. The company also reported the completion of the project's hydrological studies. Havilah describes the Maldorky deposit as a horizontal slab of iron ore with approximate thickness of 100 m. The Maldorky project has a JORC Indicated Resource of 147 Mt at 30.1% Fe. The project is approximately 300 km east of Port Pirie.

The Middleback Ranges Iron Ore project has reported an increase in its hematite resources and a slight decrease in its magnetite reserves and resources as at 30 June 2015. Responding to the low iron ore price,  Arrium Ltd's exploration for a future source of iron ore that can provide low-cost and low-capital requirements during mining and production has been focused near existing mine deposits (such as Camel Hills and Iron Warrior). Arrium anticipates that Camel Hill, which is located 5 km west of the Iron Baron and Iron Warrior deposits, will contribute to the project's hematite reserves. As at end of June 2015, the Middleback Ranges Iron Ore project's hematite JORC Resource was 183.3 Mt at 56.7% Fe (inclusive of JORC Proven and Probable Reserves of approximately 23.1 Mt at 57.9% Fe). For the same period, the project has an estimated magnetite resource of 179 Mt at 34.8% Fe (inclusive of Proven and Probable Reserves of approximately 61.9 Mt at 38.3% Fe). Arrium was put under administration in April 2016 and, consequently, publication of a 2016 annual resource statement was not available during the writing of this review.

New South Wales

The Hawsons iron project (Carpentaria Exploration Ltd) reported the completion of the project's metallurgical test work program during 2015. According to Carpentaria, the metallurgical results demonstrated the project's potential to produce high-grade magnetite concentrate at 70% Fe at a low production cost and using a less complex beneficiation process. Carpentaria also announced the securement of agreements from prospective customers for the project's future products. Total mineral JORC Resources of 1769 Mt at an average grade of 17.5% Fe (with JORC Indicated component of 215 Mt at 18.2% Fe) remain unchanged during the review period. Hawsons is located 60 km southwest of Broken Hill, NSW.

Tasmania

Grange Resources Ltd's Savage River magnetite mine is the only established magnetite operation in Tasmania. Savage River processes and beneficiates its magnetite ore to produce magnetite pellets at its plant at Port Latta (on the northwest coast of Tasmania) for export throughout the Asia Pacific region. Savage River comprises several magnetite deposits, which include the North Pit, Centre Pit South and South deposits. Savage River has reported a total magnetite ore JORC Resource of approximately 383 Mt at Davis Tube Recovery with a grade of 47.7 %. The magnetite mineral resource is inclusive of 90.7 Mt of Proved and Probable Ore Reserves. Savage River reported its 2015 annual magnetite concentrate production of 2.6 Mt and equivalent pellet production of 2.5 Mt.

Victoria

Since the completion of the Nowa Nowa iron project definitive feasibility studies in 2014, minimal work has been conducted at the project during the first half of 2015. Eastern Iron Ltd said that future development of Nowa Nowa will be subject to favourable market conditions for iron ore. The project's Five Mile deposit total JORC resources remained the same during the review period at approximately 9.05 Mt at an average grade of 50.8% Fe. The project is located approximately 270 km east of Melbourne.

Notes

  1. Agglomeration is the process in which magnetite grains are aggregated into pellets using a chemical binding reagent. Pellets are produced in a pelletising plant.
  2. Davis Tube Recovery (DTR) testing is a laboratory technique which uses a Davis Tube to recover magnetic particles from an ore samples. The per cent mass recovery of magnetic material is determined from the mass of sample recovered compared to the sample mass. The recovered magnetic and non-magnetic portions can be analysed for chemical composition (taken from Minotaur Exploration report explanatory notes).

Summerfield, D., 2016. Australian Resources Review: Iron. Geoscience Australia, Canberra, Australia.