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Western Plains Resources
Ticking every box on the path to 2011 iron ore production
As Robert Duffin, Executive Chairman at Western Plains Resources (WPG), an ASX listed, Sydney-headquartered miner with advanced iron ore projects located in South Australia, says, “The real trick in the iron ore business for iron ore juniors is to get the port access agreement and the logistics chain optimised.”
“Having an iron ore deposit is necessary to become an iron ore producer, but it’s not sufficient. The real trick is getting all the boxes in the logistics chain ticked, and we have now got that.”
Western Plains also has the projects to best make use of this enviable position: Its flagship Peculiar Knob iron ore project—the highest grade undeveloped iron deposit in Australia, and another project nearby, named Hawks Nest—a larger tonnage project with different types of iron ore potential. Essentially, Western Plains ticks an awful lot of boxes. The old ‘grade is king’ saying? Check. Permitting and finance almost, if not already, in place for both the mining operation, port development and transport/infrastructure work? Check. Early-mover advantage enabling Western Plains to bring their high grade, shovel-ready flagship project into production in 2011? Check. IRJ sat down with Duffin to talk about what is left for Western Plains to tie up, quite how much is on offer within the company portfolio and, in a nutshell, look at exactly how an iron ore junior ought to be going about its business in South Australia today.
Location, access and agreements
Duffin says that when Western Plains was formed in 2004 and floated on the ASX in 2005, its assets following the IPO consisted of gold and copper exploration properties in eastern Australia.
“In 2006, we acquired a privately owned company called Southern Iron, who over the previous year had acquired, from a company called Felix Resources, a major coal company [and] iron ore projects, which it had on its books for many years but which were non-core assets by that stage,” Duffin says.
“Southern Iron acquired those assets from Felix in 2006 and we, Western Plains, bought Southern Iron [in that same year]. Subsequent to that, the focus of our company has been shifted entirely toward the development to their iron projects in South Australia, and one way or another we’ve either divested or relinquished our gold and copper exploration properties in eastern Australia.”
Yet Western Plains was by no means starting from scratch when it shifted focus. Duffin says that the projects had already seen a lot of work under the FACE project, including an “innovative and ambitious project” aimed at developing a merchant pig iron business based on iron properties in the locale. While a great idea, other factors such as market timing thwarted those plans and once their work was complete in around 2000/2001, it was elected not to take the project any further. When Western Plains acquired those iron ore assets, they had already enjoyed a wealth of exploration work and had resource statements made.
“The first thing we did when we acquired them was to do a lot more drilling in the flagship project which is called Peculiar Knob and in late 2007 we completed a detailed feasibility study for the development of Peculiar Knob,” Duffin says of the study indicating the projects ability for exportation through a local port. When that port proved tricky to pen a deal for, Western Plains remained undeterred and spent a couple of years looking at other options.
“As you are probably aware, the iron ore business is as much about access to infrastructure as it is about access to iron ore, so we found ourselves with a terrific iron ore deposit but no way of getting it out in the country,” Duffin says.
“We spent a lot of time in looking at various port options and that culminated in a decision by us to focus on Port Pirie in South Australia. We ended up doing a deal with the port owner—Flinders Ports Propriety Limited—at the end of June 2010, giving us 30 years access to use [the port].”
With the logistics chain firmed up and plenty of project exploration to build upon, Western Plains went about the permitting, mine leasing and financing process which is now well-advanced towards ensuring Peculiar Knob can be brought into production as early as 2011.
The Portfolio’s potential revealed
With the fast-approaching production time, excellent logistics chain and all mining leases, native title agreements and compensation agreements in place, we turn our attention to exactly how much Peculiar Knob has to offer. It is situated in the Woomera Prohibited Area (WPA) of South Australia, but Duffin says that it is not a particularly sensitive spot and the Department of Defence has signed all of the necessary consents to commence mining. In short, other than some development consent approvals to do some capital works at Port Pirie, the project is good to go. The company is working on finalizing those well-advanced plans to bring the project into production at an initial rate of 3.4 million tonnes per annum in around 15 months from now. Duffin says that the company will then be exporting product from Peculiar Knob to China and other Asian economies.
“In addition [to being] very high in iron, it’s also extremely low in the two key impurities in the iron business and that’s phosphorus and alumina, so it’s a tremendous iron ore deposit for blending with lower grade deposits from other projects to improve the sinter and blast furnace performance of a steel mill,” he explains.
“That’s the way we’ve been able to generate these M.O.U.’s for sales that we have in place with a range of mills in Asia and our European uptake partner.”
Western Plains’ other flagship project, Hawks Nest, is altogether different. Unlike Peculiar Knob, this much-larger project is situated in a more sensitive part of the W.P.A and, as a result, poses different challenges and requirements for Western Plains. However, these do not detract from its impressive potential.
“It has a much larger tonnage of iron ore and it’s got several different types of iron ore whereas Peculiar Knob is just direct shipping haematite. At Hawks Nest we have direct shipping haematite but in addition to that we have magnetite and a haematite banded iron formation,” Duffin says.
“It contains a lot more Fe in it but because the project area lies within what the Department of Defence calls the ‘core area of operation,’ of the W.P.A, today we have not been able to get [the] Commonwealth government to develop it.”
The company has been continually committed to working with the Commonwealth to dispel any myths about the coexistence of mining/military activity. Just a few months ago, this hard work came to a head and the Commonwealth appointed an independent review to inquire into the commercial uses of the W.P.A.
“That review is running its course. We’ve have launched a very detailed submission, supported by quite a few independent consultant reports who come from the security and safety industries and our consultants believe that the military and mining industries can coexist,” Duffin says.
“We are seeking to convince the commonwealth that mining is a great way of developing the potential of the outback parts of South Australia in the way everybody recognizes. The potential exists, but this is a way of actually delivering on it.”
Once government is fully on board, Hawks Nest’s direct shipping iron ore deposits can become a bolt-on addition to those of Peculiar Knob and, of course, increase the mine life of an integrated project. Duffin says that with some capital already in place, little more would need to be sunk in order to develop Hawks Nest because, owing to Peculiar Knob, everything will be in place. All that is left to achieve is that Department of Defence agreement and according to Duffin, the Commonwealth has received almost 50 submissions from mining companies, service providers, native title claimants, industry associations and others asking that this decision be made.
Aside from its two flagship iron ore projects, Western Plains also has the Penrhyn coal deposit which, whilst not as well-advanced, commands attention in the long-term.
“It is a very large tonnage sub-bituminous coal project lying in what’s called the Arckaringa Basin and with potential for several million tons of coal,” Duffin says.
“It’s something that we will be developing after we develop our iron ore projects because it lies just 20 kilometres from the infrastructure route that we will be developing for taking the iron ore from Peculiar Knob to the railway line. Having developed the haul load and rail loading facilities it will be simple to add a coal circuit to the export chain.”
Once again, planning and development of projects which, once in production, facilitate development of others has created a value chain for any infrastructural and port work undertaken. Additionally, another point of location-advantage is the central Australian railway line running right through the project area. This is no narrow gage, low tonnage line either; it’s a standard gage line which is currently under-utilized and was originally built specifically to assist development of the resources sector in the area.
Grade, logistics and early production advantages
On closer inspection of the projects, their placement, grades and relations to one another, it becomes clear that Western Plains’ strong suits play out across the portfolio. Duffin says that understanding the company’s competitive edges, which are three-fold, begins with the high grade iron nature of Peculiar Knob coupled with the low phosphorus and low alumina, which make it a very attractive source of iron units to the international steel industry.
“There are plenty of iron ore deposits out there that are capable of delivering 58 per cent Fe, but very few are capable of delivering greater than 62 per cent,” he says. “The premium that the 62 per cent Fe product attracts relative to the 58 per cent Fe product is currently more than US$30 a ton. Even though you’ve only got an extra four per cent, it’s another 25 or 30 per cent to the value.”
Secondly, he highlights the port access agreement which gives Western Plains the opportunity to implement its business plan without cause for concern over competition or limited port space.
“The history in Western Australia suggests that those companies that secure port access agreements first are the ones that grow and own a position to use that access as leverage to develop interests in other iron ore projects,” Duffin says. “That’s what we’ll be trying to do.”
And thirdly, he notes how few other iron ore projects will be in production and in the market within next year.
“We will be in the market before much of the expansion that has been announced, for example by Rio in the last 24 hours in the Pilbara, we’ll be in the market before that happens,” he states. “What we are trying to do is mine our project and get the benefit of high prices in the early years.”
The Western Plains agenda for the coming year and beyond is already well underway. Over the next few months, the company will finalise development consent authority for the capital work it proposes to do at Port Pirie, and Duffin says that arranging financing is planned for between September and Early November. The longest lead items for commencing production, such as procuring rail wagons and construction at Port Pirie, he says, will take between nine and 12 months.
“Realistically we will be in production by the end of next year,” he says.
“You just can’t go beyond the high grade nature of the iron ore project from Peculiar Knob. The other element is port access. It doesn’t matter what your deposit is if you don’t have port access. Port access is the key to turning an iron stone into an iron ore—simple as that.”
Western Plains is one of those standout miners which truly ticks all of the boxes it comes across, and it’s running out of boxes as production looms ever closer. If you’re looking at the burgeoning iron ore industry in South Australia, you’re undoubtedly already looking at this company—but make sure to pay close attention. Within the next year and beyond Western Plains looks set to accomplish some impressive and exciting goals.
westernplainsresources.com.au
As Robert Duffin, Executive Chairman at Western Plains Resources (WPG), an ASX listed, Sydney-headquartered miner with advanced iron ore projects located in South Australia, says, “The real trick in the iron ore business for iron ore juniors is to get the port access agreement and the logistics chain optimised.”
“Having an iron ore deposit is necessary to become an iron ore producer, but it’s not sufficient. The real trick is getting all the boxes in the logistics chain ticked, and we have now got that.”
Western Plains also has the projects to best make use of this enviable position: Its flagship Peculiar Knob iron ore project—the highest grade undeveloped iron deposit in Australia, and another project nearby, named Hawks Nest—a larger tonnage project with different types of iron ore potential. Essentially, Western Plains ticks an awful lot of boxes. The old ‘grade is king’ saying? Check. Permitting and finance almost, if not already, in place for both the mining operation, port development and transport/infrastructure work? Check. Early-mover advantage enabling Western Plains to bring their high grade, shovel-ready flagship project into production in 2011? Check. IRJ sat down with Duffin to talk about what is left for Western Plains to tie up, quite how much is on offer within the company portfolio and, in a nutshell, look at exactly how an iron ore junior ought to be going about its business in South Australia today.
Location, access and agreements
Duffin says that when Western Plains was formed in 2004 and floated on the ASX in 2005, its assets following the IPO consisted of gold and copper exploration properties in eastern Australia.
“In 2006, we acquired a privately owned company called Southern Iron, who over the previous year had acquired, from a company called Felix Resources, a major coal company [and] iron ore projects, which it had on its books for many years but which were non-core assets by that stage,” Duffin says.
“Southern Iron acquired those assets from Felix in 2006 and we, Western Plains, bought Southern Iron [in that same year]. Subsequent to that, the focus of our company has been shifted entirely toward the development to their iron projects in South Australia, and one way or another we’ve either divested or relinquished our gold and copper exploration properties in eastern Australia.”
Yet Western Plains was by no means starting from scratch when it shifted focus. Duffin says that the projects had already seen a lot of work under the FACE project, including an “innovative and ambitious project” aimed at developing a merchant pig iron business based on iron properties in the locale. While a great idea, other factors such as market timing thwarted those plans and once their work was complete in around 2000/2001, it was elected not to take the project any further. When Western Plains acquired those iron ore assets, they had already enjoyed a wealth of exploration work and had resource statements made.
“The first thing we did when we acquired them was to do a lot more drilling in the flagship project which is called Peculiar Knob and in late 2007 we completed a detailed feasibility study for the development of Peculiar Knob,” Duffin says of the study indicating the projects ability for exportation through a local port. When that port proved tricky to pen a deal for, Western Plains remained undeterred and spent a couple of years looking at other options.
“As you are probably aware, the iron ore business is as much about access to infrastructure as it is about access to iron ore, so we found ourselves with a terrific iron ore deposit but no way of getting it out in the country,” Duffin says.
“We spent a lot of time in looking at various port options and that culminated in a decision by us to focus on Port Pirie in South Australia. We ended up doing a deal with the port owner—Flinders Ports Propriety Limited—at the end of June 2010, giving us 30 years access to use [the port].”
With the logistics chain firmed up and plenty of project exploration to build upon, Western Plains went about the permitting, mine leasing and financing process which is now well-advanced towards ensuring Peculiar Knob can be brought into production as early as 2011.
The Portfolio’s potential revealed
With the fast-approaching production time, excellent logistics chain and all mining leases, native title agreements and compensation agreements in place, we turn our attention to exactly how much Peculiar Knob has to offer. It is situated in the Woomera Prohibited Area (WPA) of South Australia, but Duffin says that it is not a particularly sensitive spot and the Department of Defence has signed all of the necessary consents to commence mining. In short, other than some development consent approvals to do some capital works at Port Pirie, the project is good to go. The company is working on finalizing those well-advanced plans to bring the project into production at an initial rate of 3.4 million tonnes per annum in around 15 months from now. Duffin says that the company will then be exporting product from Peculiar Knob to China and other Asian economies.
“In addition [to being] very high in iron, it’s also extremely low in the two key impurities in the iron business and that’s phosphorus and alumina, so it’s a tremendous iron ore deposit for blending with lower grade deposits from other projects to improve the sinter and blast furnace performance of a steel mill,” he explains.
“That’s the way we’ve been able to generate these M.O.U.’s for sales that we have in place with a range of mills in Asia and our European uptake partner.”
Western Plains’ other flagship project, Hawks Nest, is altogether different. Unlike Peculiar Knob, this much-larger project is situated in a more sensitive part of the W.P.A and, as a result, poses different challenges and requirements for Western Plains. However, these do not detract from its impressive potential.
“It has a much larger tonnage of iron ore and it’s got several different types of iron ore whereas Peculiar Knob is just direct shipping haematite. At Hawks Nest we have direct shipping haematite but in addition to that we have magnetite and a haematite banded iron formation,” Duffin says.
“It contains a lot more Fe in it but because the project area lies within what the Department of Defence calls the ‘core area of operation,’ of the W.P.A, today we have not been able to get [the] Commonwealth government to develop it.”
The company has been continually committed to working with the Commonwealth to dispel any myths about the coexistence of mining/military activity. Just a few months ago, this hard work came to a head and the Commonwealth appointed an independent review to inquire into the commercial uses of the W.P.A.
“That review is running its course. We’ve have launched a very detailed submission, supported by quite a few independent consultant reports who come from the security and safety industries and our consultants believe that the military and mining industries can coexist,” Duffin says.
“We are seeking to convince the commonwealth that mining is a great way of developing the potential of the outback parts of South Australia in the way everybody recognizes. The potential exists, but this is a way of actually delivering on it.”
Once government is fully on board, Hawks Nest’s direct shipping iron ore deposits can become a bolt-on addition to those of Peculiar Knob and, of course, increase the mine life of an integrated project. Duffin says that with some capital already in place, little more would need to be sunk in order to develop Hawks Nest because, owing to Peculiar Knob, everything will be in place. All that is left to achieve is that Department of Defence agreement and according to Duffin, the Commonwealth has received almost 50 submissions from mining companies, service providers, native title claimants, industry associations and others asking that this decision be made.
Aside from its two flagship iron ore projects, Western Plains also has the Penrhyn coal deposit which, whilst not as well-advanced, commands attention in the long-term.
“It is a very large tonnage sub-bituminous coal project lying in what’s called the Arckaringa Basin and with potential for several million tons of coal,” Duffin says.
“It’s something that we will be developing after we develop our iron ore projects because it lies just 20 kilometres from the infrastructure route that we will be developing for taking the iron ore from Peculiar Knob to the railway line. Having developed the haul load and rail loading facilities it will be simple to add a coal circuit to the export chain.”
Once again, planning and development of projects which, once in production, facilitate development of others has created a value chain for any infrastructural and port work undertaken. Additionally, another point of location-advantage is the central Australian railway line running right through the project area. This is no narrow gage, low tonnage line either; it’s a standard gage line which is currently under-utilized and was originally built specifically to assist development of the resources sector in the area.
Grade, logistics and early production advantages
On closer inspection of the projects, their placement, grades and relations to one another, it becomes clear that Western Plains’ strong suits play out across the portfolio. Duffin says that understanding the company’s competitive edges, which are three-fold, begins with the high grade iron nature of Peculiar Knob coupled with the low phosphorus and low alumina, which make it a very attractive source of iron units to the international steel industry.
“There are plenty of iron ore deposits out there that are capable of delivering 58 per cent Fe, but very few are capable of delivering greater than 62 per cent,” he says. “The premium that the 62 per cent Fe product attracts relative to the 58 per cent Fe product is currently more than US$30 a ton. Even though you’ve only got an extra four per cent, it’s another 25 or 30 per cent to the value.”
Secondly, he highlights the port access agreement which gives Western Plains the opportunity to implement its business plan without cause for concern over competition or limited port space.
“The history in Western Australia suggests that those companies that secure port access agreements first are the ones that grow and own a position to use that access as leverage to develop interests in other iron ore projects,” Duffin says. “That’s what we’ll be trying to do.”
And thirdly, he notes how few other iron ore projects will be in production and in the market within next year.
“We will be in the market before much of the expansion that has been announced, for example by Rio in the last 24 hours in the Pilbara, we’ll be in the market before that happens,” he states. “What we are trying to do is mine our project and get the benefit of high prices in the early years.”
The Western Plains agenda for the coming year and beyond is already well underway. Over the next few months, the company will finalise development consent authority for the capital work it proposes to do at Port Pirie, and Duffin says that arranging financing is planned for between September and Early November. The longest lead items for commencing production, such as procuring rail wagons and construction at Port Pirie, he says, will take between nine and 12 months.
“Realistically we will be in production by the end of next year,” he says.
“You just can’t go beyond the high grade nature of the iron ore project from Peculiar Knob. The other element is port access. It doesn’t matter what your deposit is if you don’t have port access. Port access is the key to turning an iron stone into an iron ore—simple as that.”
Western Plains is one of those standout miners which truly ticks all of the boxes it comes across, and it’s running out of boxes as production looms ever closer. If you’re looking at the burgeoning iron ore industry in South Australia, you’re undoubtedly already looking at this company—but make sure to pay close attention. Within the next year and beyond Western Plains looks set to accomplish some impressive and exciting goals.
westernplainsresources.com.au
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