Iron Ore

Resource figures are current as at 30 December 2014. Commentary is current as of January 2016

Iron (Fe) is a metallic element that constitutes about 5% 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 are 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% iron. 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 a significant example of a 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 results in lower ore grade, making it more costly to produce concentrate for steel smelters. Magnetite mining is an emerging industry in Australia with large deposits being developed in the Pilbara region of WA.

Australia's large magnetite Sino Iron project continues to improve the productivity of two of its production lines and aims for full operations for the remaining four production lines in 2016. The country's other magnetite operation sites, Karara in the mid-west of WA and the established Savage River magnetite mine in Tasmania, continue to increase their production of magnetite concentrate. Karara has reported production of approximately 1.7 million wet metric tonnes (Mwmt) of magnetite concentrate during the June 2015 quarter. The Savage River mine is confident of achieving its production target of approximately 2.5 million tonnes (Mt) of magnetite concentrate by the end of December 2015 due to the completed refurbishment of the mine's old mills.

Mining and processing hematite and magnetite ores

High-grade hematite ore is referred to as direct shipping ore (DSO) because it is mined and the ores go through a relatively simple crushing and screening process before being exported for use in steel making. Australia's hematite DSO from the Hamersley region averages from 56% to 62% iron. Like hematite ores, magnetite ores require initial crushing and screening, but undergo a second stage of processing which relies on the magnetic properties of the ore and involves magnetic separators to extract the magnetite and produce a concentrate. Further processing involves the 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 iron grade than hematite DSO currently being exported from the Hamersley region. Additionally, when compared to hematite DSO, the magnetite pellets contain lower levels of impurities, such as phosphorous, sulphur and aluminium. These magnetite pellets are premium products which attract higher prices from steel makers, offsetting the higher costs of production.

Worldwide Production Trends

Hematite ore dominates world production and is sourced mainly in Australia and Brazil. Magnetite ore has established its presence in world production and contributed to the increase in Australia's Economic Demonstrated Resources (EDR) of iron ore, mainly as a result of the commissioning of large magnetite projects in WA, numerous magnetite developments in South Australia (SA) and ongoing established operations such as Savage River in Tasmania. China dominated in 2014 with 45% of world production of iron ore followed by Australia with 22% (735 Mt) and Brazil with 10% (320 Mt).

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:

  • tonnes of iron ore, and
  • tonnes of contained iron.
Commodity Units Australia World
JORC Reserves (a)
(% of Accessible EDR)
Demonstrated ResourcesInferred Resources (c)Accessible EDR (d)Mine Production 2014 (e)Economic Resources 2014 (f)Mine production 2014 (g)
Economic (EDR) (b) Subeconomic
Para-marginalSub-marginal
Iron OreMt20 487 (38%)54 4121569172782 16754 412735190 0003200
Contained IronMt Fe9665 (39%)24 63979957036 17324 63942487 000
Table 1: Iron ore and contained iron JORC Reserve and Resources

This form of reporting is mainly because of an increase in magnetite resources resulting from ongoing exploration and assessment of known and new magnetite deposits. EDR of iron ore in 2014 increased by 3.5% to 54 412 Mt. 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. This trend has been demonstrated through a slight increase of Australia's 2014 EDR of iron ore.

Australia's EDR has a resource life of 75 years at 2014 rates of production. Figure 1 shows the proportion of iron ore EDR in states and the Northern Territory.

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

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

Contained Iron: As at December 2014, Australia's EDR of contained iron was estimated to be 24 639 Mt while Paramarginal Resources were 799 Mt and Inferred Resources were 36 173 Mt (Table 1).

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

Accessible EDR

Australia has Accessible EDR (AEDR) of iron ore totalling 54 412 Mt (Table 1), of which 89% occurs in WA.

JORC Reserves

The total Joint Ore Reserves Committee (JORC) Code Reserves of iron ore were estimated to be 20 487.3 Mt, representing 38% of accessible EDR (Table 1). The JORC Code Reserves of contained iron is 9665 Mt, or 39% of the EDR of contained iron (Table 1). However, unreported reserves and resources are not included in these figures. Based on publicly available data, JORC Code Reserves are sufficient for approximately 30 years at the current (2014) rate of mine production.

The EDR during the 2014 period has only increased slightly by 3.5% from the previous 2013 assessment period, a reflection of the current trend of low iron ore prices. Resource increases were mostly the result of continuous delineation of deposits within the mining regional areas as operations drive an increase in production output. Project deposits that increased reserves and resources during the 2014 assessment period include Rio Tinto's Hamersley Iron, Hope Downs Eastern Range JV, Channar and Robe JV, BHP Billiton's Mt Newman, Yandi, Mt Goldsworthy and Jimblebar at its WA Iron Ore operations, Fortescue Metals Group's Chichester, Christmas Creek and Solomon operation sites, Atlas Iron's Davidson Creek, Corunna Downs, McPhee Creek and Mt Webber projects and Grange Resources's Savage River Magnetite mine.

Exploration expenditure

Australian Bureau of Statistics (ABS) data indicates that mineral exploration expenditure in Australia for 2014 totalled $1837 million, a 27% decrease on the $2522.6 million spent in 2013. About $531.2 million was spent on iron ore exploration in WA, which represented 94% of Australia's total iron ore exploration expenditure. Western Australia also accounted for 57% of total mineral exploration expenditure in Australia during 2014 of around $1045.3 million. Iron ore exploration expenditure in SA was $15.5 million, the Northern Territory (NT) $12.1 million and Tasmania $4.4 million.

Production

Australia's total production of iron ore for 2014 was 735 Mt with WA producing 720 Mt, or 98% of overall production. South Australia had a slight increase in its iron ore production from approximately 10.7 Mt in 2013 to 11.3 Mt in 2014, representing 2% of Australia's total iron ore production. The Northern Territory and Tasmania represent less than 5% of the national total of iron ore production.

The Office of the Chief Economist (OCE) reported Australia's iron ore exports during 2014 to be 717 Mt, a 24% increase on the 2013 figure of approximately 579 Mt. OCE has forecast an increase in iron ore exports to approximately 792 Mt or by 10% in 2015 financial year, with the projected resource increase from the country's major producers, Rio Tinto, BHP Billition and Fortescue Metals Group, and from the commissioning of the Roy Hill Project. Australia exports its iron ore to countries such as China, Japan and the Republic of Korea. OCE forecasts a global increase in steel consumption to 1.74 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 29% at 54 412 Mt, followed by Brazil with 16%, Russia with 13% and China with 12%. In terms of contained iron, Australia has 28% of world EDR while Brazil has the second largest EDR with 18%.

Industry Developments

The dynamic of the present iron ore market has led to greater economic instability for some companies in the industry, evidenced by the current trend in some mining operations and project developments being suspended. 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 Beyondie Iron project had a 27% increase in mineral JORC Inferred Resources to 714 Mt at 27.4% Fe at zero cut-off grades. The owner, Emergent Resources Ltd, reports that the increase was a result of limited additional drilling within the previous project resource area. The Beyondie Iron project is located adjacent to the Great Northern Highway in the northern part of Western Australia.

Chichester and Solomon operation hubs by Fortescue Metals Group (FMG) produced 165 Mt of iron ore during 2015 with plans to maintain this level of production through 2016. The Chichester hub (at Chichester Ranges) comprises Cloudbreak and Christmas Creek mines whilst the Solomon hub (located in Hamersley Ranges) includes the Firetail and Kings Valley mines. As at 30 June 2015, Chichester and Solomon operations have estimated JORC Reserves of 2400 Mt at 57.3% 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. The company anticipates that the Iron Hill deposit mineral resource has the potential to support an extended operation of 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. Both sites are approximately 62-63 km southwest of the town of Paynes Find in the Yilgarn region.

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 Karara operations during the reporting period. Accordingly, during the financial year 2014-15 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 BIF deposit.

The Mt Bevan Iron Ore project is Legacy Iron Ore Ltd's major iron ore joint-venture project with Hawthorn Resources Ltd. Legacy's 2015 annual report gives the project's total JORC Resources as 1170 Mt at 34.9% iron. Legacy is also exploring the potential of a direct shipping hematite ore at the project's eastern BIF target area. The company says that geochemical test results of surface samples taken from the Eastern BIF area returned mineralisation of greater than 60% iron. The Mt Bevan Iron Ore project is located approximately 95 km northwest of Menzies in the Yilgarn region.

The Mt Stuart Iron Ore Joint Venture (MSIOJV) and Red Hill Iron Ore Joint Venture (RHIOJV) form part of the developing West Pilbara Iron Ore Project (WPIOP), which is being managed by API Management Pty Ltd. Resource statements from the MSIOJV and RHIOJV have reported resource estimate increases in 2015. Catho Well Channel Iron Deposit (CID), which occurs within the MSIOJV area, reported an increase of its JORC Reserves to approximately 83 Mt at 55.1% Fe and Resources of 161 Mt at 54.4% Fe. Consequently, an extension of resource drilling at Kens Bore and the addition of the Red Hill Creek West deposits have increased the RHIOJV combined JORC Resource estimate to approximately 813 Mt at 56.5% Fe. The Stage 1 development feasibility study for the WPIOP progresses with activities including planning of key project approvals and development of a schedule.

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 was halted until infrastructure issues are resolved for the company's Marillana project. In December 2014, Brockman Mining reported upgrades of JORC Resources for the Ophthalmia project deposits for a total of 341 Mt at an average grade of approximately 59.3% Fe. The Ophthalmia project is approximately 80 km southeast of the company's principal project, Marillana Iron project, in the east Pilbara.

Rio Tinto Ltd's Pilbara Iron Ore operation achieved its 290 Mt per year production capacity before the end of 2014 financial year. The company says the operation is expected to increase its production further to 330 Mt in 2015, which will be supported by ongoing operational expansions. Accordingly, the company has reported increases of ore reserves and resources delineated from various deposits within Pilbara mine operations, including Koodaideri, Yandicoogina Braid and Jimmawurrada. Upgrades for Koodaideri have increased its reserves to 467 Mt at 61.8% Fe and the inclusion of Inferred Resources from the Yandicoogina Braid (including 488 Mt at 61.7% Fe of Brockman ore and 62 Mt at 56.9% Fe of CID ore) and Jimmawurrada's 677 Mt at 53.1% Fe deposits have contributed to the resource increases.

BHP Billiton Ltd's 2015 annual report notes the completion of various expansion projects at its Western Australia Iron Ore (WAIO) operations with results intended to further the operations capacity growth of 290 Mt per year. The company reported its 2015 financial year share of production was 218.0 Mt of iron ore which is expected to increase to 233 Mt in the succeeding financial year. Included in the expansion is the Jimblebar operation, which achieved a production capacity rate of 45 Mt per year during the 2015 financial year period.

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

The Yerecoin project comprises three magnetite deposits, namely the Yerecoin Main, Yerecoin South and Yerecoin North deposits. Radar Iron Ltd reported a resource upgrade for the Yerecoin Main deposit resulted from the remodelling of resources and inclusion of previous drill-hole data. The Yerecoin Main deposit's total new JORC Resource is approximately 130.8 Mt at 29.7% Fe (inclusive of an Indicated Resource of 31 Mt at 31.4% Fe), bringing an overall total for the Yerecoin Project JORC Resources to 388.3 Mt 28.6% Fe. Yerecoin is located approximately 15 km east of New Norcia in the Yilgarn region.

South Australia

The Central Eyre Iron Project's (CEIP) Boo-Loo magnetite deposit has increased its JORC Mineral resource to 1147 Mt at an average grade of 16% Fe. Boo-Loo occurs within Iron Road Ltd's CEIP project which now has total JORC Resources of 4510 Mt at an average grade of 16% Fe.

Royal Resources Ltd has identified a potential additional source of magnetite during its geological studies of the Iron Peak deposit. The study included a review of existing drill-hole data that intersected high-grade magnetite mineralisation (including 38 m at 23.1% DTR2). The company plans to conduct a drilling program at the deposit to investigate further potential high-grade zones and the possibility of an additional source of magnetite for the company's Razorback Premium Iron Ore Project (RPIOP). The company noted that the intersected high-grade zones are outside the current estimated magnetite JORC Resources of approximately 365 Mt at 19% Fe for Iron Peak. As reported in the company's 2015 annual report, the RPIOP total magnetite JORC Resources now stand at approximately 2732 Mt at 18.2% Fe.

The Kimba Gap Iron project has reported initial JORC Inferred Resources during the 2014 period of approximately 487 Mt at 24.7% Fe. Kimba Gap is Centrex Metals Ltd's third magnetite iron ore project, located 60 km west of Whyalla on the Eyre Peninsula.

The Maldorky Iron Ore project's mining lease application process is in progress with public comments under consideration by the SA Department of State Development. Project owner, Havillah Resources Ltd, has also reported the completion of the project's hydrological studies. Havillah describes the Maldorky deposit as a horizontal slab of iron ore with approximate thickness of 100 m. The company's 2015 annual report indicates 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.

Arrium Ltd's 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, the company'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).

New South Wales

In March 2014, Hawsons Iron project reported its initial magnetite JORC Indicated Resource of approximately 215 Mt at 18.2% Fe. This brings the project's total JORC Resources to approximately 1769 Mt at an average grade of 17.5% Fe with an Inferred component of 1554 Mt at 17.4% Fe. Hawsons Iron project, which is located 60 km southwest of Broken Hill, is a joint venture between Carpentaria Exploration Ltd and Pure Metals Pty Ltd. As reported by Carpentaria, the project is currently undertaking bankable feasibility studies on low-cost production of a high-grade magnetite concentrate.

Tasmania

Grange Resources's Savage River magnetite mining, is Australia's 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 North West 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 resource of approximately 390.1 Mt at DTR grade of 47.7 %. The magnetite Mineral Resource is inclusive of approximately 100 Mt of Proven and Probable Ore Reserves. Grange Resources states that the operation is on track to produce approximately 2.5 Mt of magnetite concentrate to the end of the 2015 period as a result of the completion of its mill refurbishment.

Victoria

Eastern Iron Ltd's Nowa Nowa Iron project completed its definitive feasibility studies in 2014 and is currently conducting further studies in response to the continuing decline in the iron ore price. The project's proposed initial development will occur at the Five Mile deposit. In September 2014, the project reported Five Mile's total JORC Resource of 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).