Hawsons Iron is conducting a strategic review of its namesake iron ore project in New South Wales to examine alternative avenues for the project’s development amid worsening global economic conditions.
This could involve using existing transport infrastructure to reduce upfront capital costs.
It will also conceptually consider a multi-stage mining operation with a lower base production rate to “right-size” the project until improved market conditions enable development of the preferred 20-million-tonne-per-annum (Mtpa) operation.
Hawsons Iron will consolidate and safeguard all the available data and information as part of the review process.
It comes after Hawsons chose to slow activity on its bankable feasibility study (BFS) this week, with company chair Dave Woodall suggesting the current inflationary environment combined with interest rate policy responses of central banks around the world had generated strong headwinds.
Hawsons managing director Bryan Granzien said the company was making the right decision given the current marketplace.
“The board’s decision to slow activity on the 20Mtpa BFS was rightly taken to prudently preserve the company’s cash resources while we take stock, move into problem solving mode and formulate the optimal path forward, which will be impacted by the changing world conditions,” he said.
Granzien stressed that while the global economic climate and associated supply chain cost impacts had changed rapidly, the longer-term potential of the Hawsons Iron project remained unaffected by the decision to slow activity on the BFS.
“To reiterate, we absolutely believe in the value of our project as a source of high-grade magnetite concentrate for the ‘green steel’ supply chain and are fully committed to examining all options available to us,” he said.
Hawsons Iron completed a mineral resource upgrade in July, boosting the project’s tonnage to 481 million tonnes of Hawsons Supergrade iron (Fe) concentrate.
This is for a 70 per cent Fe product, which is poised to be one of the highest-grade Fe products on the seaborne market.
To put it in perspective, BHP’s Western Australian Iron Ore (WAIO) operations have historically produced iron ore at 61 per cent Fe. This will increase to 62 per cent once BHP’s South Flank operation has ramped up.
Hawsons’ ongoing discussions with potential offtake partners have determined much greater demand than the proposed 20Mtpa production profile.
With the ‘green steel’ revolution amongst us, steelmakers will need to prioritise high-grade iron ore products to drive down emissions in the steelmaking process. Hawsons’ 70 per cent magnetite product is seen as a perfect suitor.
In order to determine the optimal path forward, Hawsons will still need to raise additional working capital, contingent on shareholder approval of several resolutions at the forthcoming annual general meeting on November 15.
Granzien encouraged shareholders to support these resolutions which would significantly enhance the company’s equity raising capacity and options for funding-required activities.
“We were preparing to raise additional capital earlier in the year, but a rapidly rising aversion to risk within equity markets abruptly curtailed our plans in the face of mounting global economic uncertainty,” Granzien said.
“The updated capital cost estimates included implausible contingencies of up to 50 per cent and in some components of the project an escalation of as much as a 300 per cent-plus within a year.
“These numbers could not be ignored and it is expected many other companies around the world will be facing similar challenges.
“The board’s decision to slow down work on the BFS was taken in response, and we were obliged to advise shareholders before determining the optimum solution.”