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BC Iron Stays True to Iron Ore

Thursday, April 27, 2017

THE INSIDE STORY: A recent foray into potash has by no means dampened BC Iron’s (ASX: BCI) commitment to iron ore.

BC Iron receives healthy earnings from iron ore, but recognises commodity diversification provides protection in the event of longer periods of low iron ore prices.

To that end, BCI is supplementing its iron ore earnings bytargeting gold/base metals and agricultural minerals.

“Iron ore is primarily driven by the Asian infrastructure investment theme,” BC Iron managing director Alwyn Vorster told The Resources Roadhouse.

“Gold is more dependent on global economic/political issues, and agriculture and industrial minerals are linked to global food consumption, population growth and reduction in arable land availability.”

BC Iron struck a Joint Venture in March with Kalium Lakes Limited (ASX: KLL) over the Carnegie potash exploration project, north-east of Wiluna in Western Australia.

“The Carnegie deal came about because we were looking to diversify into commodities with different drivers to iron ore,” Vorster explained.

“This move into potash, added to the pending conclusion of a scoping study on our Mardie salt project, positions BC Iron well in agricultural and other industrial commodities leveraged to a growing global population.”

The Carnegie project is prospective for large sub-surface brine deposits, which could be developed into a solar evaporation and processing operation producing sulphate of potash.

BC Iron can earn-in a 50 per cent interest of the Carnegie JV by spending up to $10.5 million over the next 2 to 3 years leading to a feasibility study.  

Vorster explained the deal did not mean BC Iron would be exiting the iron ore sector, adding that despite recent negative market sentiments, he declared the company remains 100 per cent dedicated to the commodity.

“We have a substantial royalty stream coming in from Iron Valley, and a very valuable asset in our Buckland project,” Vorster said.

“These two projects will be responsible for at least 50 per cent of our future earnings, so attention and resources should be allocated to the iron ore arm of the business accordingly.”

Iron Valley isin the Central Pilbara and is operated by Mineral Resources (ASX: MIN) under a royalty agreement.

As at 30 June 2016, Iron Valley’s Mineral Resource was 238.7 million tonnes at 58.4 per cent iron with an Ore Reserve of 123.2 million tonnes at 58.8 per cent iron.

Iron Valley is working well for BC Iron – during the quarter ending 31 December 2016, MIN shipped a record of 2.1 million wet metric tonnes, providing a record quarterly EBITDA for BC Iron of $8.1 million.

This was the third consecutive quarter record production and EBITDA figures had been achieved.

The Buckland project is a strategic mine-to-port iron ore development in the West Pilbara.

A 2014 feasibility study forecast a mine at Bungaroo South and independent infrastructure solution comprising a private haul road and transhipment port at Cape Preston East.

BCI has approval to be foundation developer of a transhipping facility at Cape Preston East with capacity of up to 20 million tonnes per annum for 20-years to meet demands of its development concept for the project.

“With the iron ore downturn in 2014 to 2016, BCI did not allocate significant resources to Buckland,” Vorster said.

“We recently appointed Viv Roberts a general manager for the iron ore division, who was previously general manager for Christmas Creek from conception through to being a 20 million tonnes per annum operation.

“Viv is the ideal person to take Buckland forward, now it is basically construction ready.

“BCI aims to select specific contractor partners during 2017 and progress Buckland towards early works at the mine and port site.”

As it spreads risk and builds alternative sources of revenue, BC Iron hopes to create potential earnings from gold or base metal investment.

“A more advanced stage gold or base metals project is required in our portfolio in the shorter-term as the most likely source to supplement our current Iron Valley income stream,” Vorster said.

“We are in discussions with various parties and remain positive BCI can secure involvement in that space during 2017.  

“BCI is different from many other smaller sized companies in that we have stable low risk earnings, and larger shareholders who support our diversification strategy into quality assets.”

BC Iron Limited (ASX: BCI)
…The Short Story

Level 1
15 Rheola Street
West Perth WA  6005

Ph: +61 8 6311 3400


Brian O’Donnell, Alwyn Vorster, Michael Blakiston, Jennifer Bloom, Martin Bryant, Andrew Haslam