We chat to Hawsons Iron managing director Bryan Granzien about the company’s renewed focus as it conducts a review and re-strategises its namesake iron ore project.
In October, Hawsons Iron made the prudent decision to slow activity on the bankable feasibility study (BFS) for its namesake magnetite project in New South Wales.
As Hawsons non-executive chair Dave Woodall put it at the company’s annual general meeting (AGM) in mid-November, a “perfect storm” of current and emerging economic factors necessitated quick action.
“The inflationary impact of the pandemic, combined with interest rate policy responses of central banks around the world, and the world’s geopolitical turbulence have generated strong market headwinds,” he said.
“In short, the cost of steel is up, the Aussie dollar is down significantly, the cost of energy is up, supply chains are more costly – if they are working at all – and lead times have blown out.
“On top of that, raising capital at this time is extremely difficult and options are limited.
“It’s a perfect storm of current and emerging economic factors that will pass and is not uncommon in the mining industry.”
No company is being spared from the economic turbulence, and those that are proactively responding and re-strategising will be best positioned to weather the storm.
Having slowed its BFS activity, Hawsons Iron is conducting a strategic review to evaluate the best pathways for the project.
It will also conceptually consider a multi-stage mining operation with a lower base production rate to “right-size” the project before eventually scaling up towards the development of the preferred 20-million-tonne-per-annum (Mtpa) operation.
This could involve using existing rail and port infrastructure to reduce upfront capital costs before the possibility of an underground slurry pipeline is considered.
The production phases would range from a minimum of 5Mtpa before achieving the ultimate goal of 20Mtpa. Whatever the revised operation looks like, the critical outcome for Hawsons Iron is to find the capital “sweet spot”.
“There will be a sweet spot based on the volume, capital cost and opex (operational expenditure) – all of those factors need to be considered,” Hawsons Iron managing director Bryan Granzien told Australian Resources & Investment.
“So what we’re saying is, let’s minimise the capital upfront cost wherever we can by using existing infrastructure, but let’s not lose sight of what we’d like to achieve in the long term.
“Most people we’re talking to – whether it’s consultants or banks – can see that this is sensible and probably the only decision in this current climate. And we’re not the only company that’s doing exactly that.”
While activity on Hawsons Iron’s BFS has slowed, it remains the key priority.
The company has already completed a significant amount of work on the BFS and has an advanced understanding of what will be required to elevate the Hawsons Iron project into production.
Granzien said the company “has done a lot of analysis” but more is needed, understanding that the BFS is an important linchpin to Hawsons Iron’s next objective – a capital raise to fund the project’s construction.
“The main trigger (for the project) is raising the capital, but to do that we need a compelling BFS,” Granzien said.
“A BFS is a study, as Dave (Woodall)articulated at the AGM. Studies look at all the details, such that you can answer any questions from investors when the time comes to raise the capital.”
Just prior to its AGM, Hawsons Iron announced it had signed a binding agreement with Flinders Ports for the potential development and operation of a greenfield port at Myponie Point in South Australia.
It comes after a non-binding memorandum of understanding (MoU) was established between the two in June, with the binding agreement expanded to include the evaluation of lower tonnage options using existing rail and port infrastructure and possibly scaling production and export options over time.
Granzien said for Hawsons to formalise its partnership with an organisation of Flinders Ports’ stature was a significant milestone.
“Flinders Ports understands the Australian maritime environment, as they’re the main operator in South Australia,” Granzien said. “And they’ve got plans to expand, which includes building a multi-commodity deepwater port. That’s what’s common between us.
“Flinders Ports has committed their support, knowledge and strong desire to work with us to achieve what we both want to achieve. The agreement is now clear, that given we do raise capital to build the mine, then they’ll be building, owning and operating that port on our behalf.”
The agreement includes options to use construction of initial port infrastructure to support a barging operation at Myponie Point during the first stage of the project’s development.
There would then be scope to incorporate the direct-to-port underground slurry pipeline as the project expands.
“This approach at Myponie Point could deliver the best of both worlds through a lower output start-up operation at a lower capital cost and a clear pathway forward to expand production to 20Mtpa using the direct-to-port underground slurry pipeline,” Granzien said.
“The strategic review will determine the optimum port and production scale-up over time.”
Given the natural undulations of equities and economies, it’s rare for a mining project to follow a straight line, and it’s how a company responds to its challenges that can best set it up for success.
Hawsons Iron is positioning itself for the long term to create lasting value for its shareholders.
Over the last 12 months, leading global companies have signed letters of intent with Hawsons Iron for offtake of approximately 50Mtpa of its Hawsons Supergrade product (70 per cent iron).
Wood Mackenzie (WoodMac) has identified Hawsons Iron as one of Australia’s most important iron ore projects. In its September report, ‘Pedal to the metal’, which contemplates iron and steel’s $US1.4 trillion shot at decarbonisation, WoodMac said Hawsons Iron would be critical for Australia to “compete in a 1.5°C world”.
WoodMac’s 1.5°C accelerated energy transition scenario (AET-1.5) is a scenario in which global temperatures since pre-industrial times are limited to 1.5°C by the end of this century and the world reaches net-zero by 2050.
Without projects like Hawsons Iron coming online, Australia and the world risk not having access to the resources needed to reduce the climate impact of steel manufacturing, which is responsible for around 7 per cent of carbon emissions annually.
The business case for the Hawsons Iron project is clear and the company is adamant a no momentary downturn is not going to deter it from its clear vision to develop the mine.
Because it’s not just in the interests of Hawsons Iron and its shareholders, it’s in the interests of a decarbonised world.
This feature appeared in the December issue of Australian Resources & Investment.