Macarthur Minerals (ASX:MIO): Interview with CEO Andrew Bruton

Macarthur Minerals

We spoke with iron ore project developer Macarthur Minerals‘ CEO Andrew Bruton about the company’s prospects with its massive magnetite resource at Lake Giles in the Yilgarn region of WA, in the light to the proximity to the Port of Esperance and the ease with which Lake Giles can potentially plug in to all the existing infrastructure.

 

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Transcription

 

Stuart: Hello, and welcome to “Stocks Down Under.” My name is Stuart Roberts and I’m one of the co-founders of our publication. And with me today, on the 6th of October, 2021, is Andrew Bruton, who’s the CEO of Macarthur Minerals, ASX:MIO. Andrew, good morning.

Andrew: Thanks, Stuart. Thanks for having me with you.

Stuart: Great to have you with us. Now is a good time to be Andrew Bruton, because Macarthur Minerals is sitting on 1.3 billion tons, approximately, of pretty good magnetite, not far away from the old Koolyanobbing iron ore mine, which many people who follow the iron ore space will recognize, currently in the hands of Mineral Resources and only about five or six years to run. And you’re sitting not far away from that mine with potentially the chance to pick up where they left off.

Andrew: Yeah, Stuart. Look, I think there’s opportunities there. Look, MRL have got a 10-year plan for the region. We’re looking to co-exist down that rail line and through that port, and we’re working with rail providers and with Southern Port Authority to get out through Esperance by the time our magnetite project comes online. So the key to that and I guess the advantage for our project over other, I guess, magnetite and iron ore projects that are up and coming is that we don’t have to build a new port and we don’t have to build new rail. It’s there. We’ve just got to be smart about how we get onto that network. And I think there’s room for everybody, and I think there’s opportunities for us to get our product through in time for first magnetite, which we’re targeting towards the end of 2024.

Stuart: Right. So for those people who don’t know Macarthur very well, look at a map of Western Australia and find that Southern Cross, roughly midway between Perth and Kalgoorlie. The old Koolyanobbing mine, which has been worked since the ’50s isn’t too far away from there. Your Lake Giles project is about 100 kilometers further north. So basically, all we need to plug into the infrastructure which would rail the iron ore to Esperance is some kind of a rail spur or some other transport mechanism just to brief that last mile, as it were.

Andrew: Correct. Yeah, look, we need to construct a 93 kilometer haul road down to a rail siding that’ll be constructed on [inaudible 00:02:21.375] line. [inaudible 00:02:22.631] You know, we’ve applied for the tenure to construct that. It’ll be a semi-sealed haul road. We’ll construct a rail siding there. And then, it’s a 503-kilometer rail haul down to the port of Esperance. And all that’s really required there is that haul road, rail siding and a solution around new rail and loading infrastructure at Esperance Port. And they’ve gone through a master plan [inaudible 00:02:47.576]. They’re in the process of going through that at the moment to look at what’s possible there and what the boundaries of potential development might be. And we’re confident that we’ll get to an outcome with them that can help Macarthur and also help open up that port to ourselves and to others and to existing users, to improve efficiencies there.

Stuart: Of course, and the time is right. Port of Esperance is only running about 50% of capacity or less, based mainly on the Koolyanobbing ore. So there’s plenty of space to accommodate other providers such as yourselves.

Andrew: Well, look. We’re below this capacity on the existing ship load and there’s work that needs to be done down there. I think the key is to come to a solution in relation to a rail loading infrastructure development that can handle our needs and handle the needs of existing users and future users coming through. So they’re about at capacity to where they’re sitting at the moment, based on current throughput, but there’s certainly room for growth there to limits and that’s what we’re working on with the port and with other stakeholders at the moment.

Stuart: Now, in addition to your natural geographic advantages, you’ve also got a very good friend in the form of Glencore. Not too long ago you negotiated a Life-of-Mine Offtake for Lake Giles with Glencore. What was the attraction of Glencore to this project?

Andrew: Well, look, Glencore had been looking at our project probably well over a decade now, probably a long time preceding my tenure at the company. Glencore liked the product. You know, we were very pleased to be able to enter into a binding Life-of-Mine Offtake Agreement with them back in early 2019. And what that does is it effectively solves the problem of product sale for us. So we get paid at the ship rail. They trade the product. We don’t take any credit risk on it. So it’s a pleasing arrangement to have in place ahead of delivering the feasibility study, because that sales and marketing component of the arrangement is, you know, effectively in place. And Glencore, look, they’re a massive global mining and trading house. They trade in excess of 100 million tons per annum of iron ore annually. They work with the likes of FMG and all the big players to move product. And I think the advantage is in increasing the amount of high-grade product in their portfolio. I certainly think that they, like others, see the move with global policy shifts towards, you know, higher grade plus 65% product because it burns more cleanly in the furnace. It fits with their global narrative on policy changes to reduce global emissions by 2050. So they see future demand for it, I think. That’s why they like what we’re trying to do and we’re very proud to be partnering with them.

Stuart: Certainly. Now, obviously, Lake Giles has had a long history. You’ve actually completed a number of feasibility studies up to the present time. Unfortunately, there’s not much we can say about those. They were done when you were totally traded on Canadian exchanges. You weren’t even listed in Australia, even though, to all intents and purposes, it’s an Australian company for the last couple of years now. You’re now completing one big feasibility study that you’d be able to talk about. But if our viewers could track down the preliminary economic assessment that was done several years ago on Lake Giles, it’s fair to say they’d be very happy, right?

Andrew: Well, look, yeah. You’re right. We’d been listed on the Toronto Stock Exchange [inaudible 00:06:26.264] Exchange for about 12 years or more. That was an historic listing. But we came home…

Stuart: Welcome home, Andrew. It’s great to have you back in Australia.

Andrew: Well, that’s right. Yeah, we effectively came home and we were an Australian company with an Australian project. We’d been listed in North America for a long time. But in late 2019, yes, we did come home and we’re listed on the ASX and that was a great thing for the company. So in that regard, you know, we’ve been exploring iron ore and developing up the project there for, you know, well over 12 years. We’ve put over 100 million dollars into the ground over there, but the story is comparatively new to Australia and Australian investors. So yeah, we’re keen to improve the story for an Australian audience. We’ve done a lot of work, we’re fully permanent, we’ve got fully granted mining leases. We’ve got environmental approvals. We just need to apply for an extension to the [inaudible 00:07:28.272] type of heritage issues in place, so we’re advanced in that regard. And I think the story forward is good.

Stuart: Right. Now, in terms of the feasibility study you’re working on, presumably next year that will be in the hands of investors to evaluate just how big this project could get.

Andrew: Yeah, look, we’re in the stages of rapidly advancing that feasibility study at the moment. You know, we’re aiming to deliver that as quickly as possible. I think line of sight of that is well and truly in front of us now. So, you know, we’re getting close to the business end of concluding that. The study that we’re doing at the moment is different. You mentioned before a preliminary economic analysis report that was prepared for the Canadian market back in 2009. It is different from that MPEA. That was a combined magnetite hematite operation that was produced for the Canadian market. We can’t disclose the results of that here in Australia, but it is a publically available document. But look, this feasibility study that we’re working on at the moment will be comprehensive. It’ll be something that can be normalized across both the TSX there and ASX, so all investors can look at it. They can look at the financial outputs for it. They can delve into the detail of it. And, you know, we’re excited about the prospect of delivering that very soon.

Stuart: Right. Now, to that end, obviously, there’s a hematite component indigent to the magnetite. You made a lot of progress there too. You’ve got Arizon ready to ship the ore down to, potentially, the port of Kwinana. Port access obviously is still to be negotiated there. But you’ve made a fair bit of progress in terms of unlocking the Ullaring hematite deposit at Lake Giles.

Andrew: Correct. Look, for a long time, the company did focus on developing its hematite assets. We’ve got 1.3 billion tons of magnetite and that’s the current sort of, I guess, focus for the company in the medium to long term. There’s a lot of resource there to develop. But over the course of the last 10 years or so, we’ve gotten, you know, sort of, 80 million tons, you know, hematite resource, and the company’s done a number of studies on that hematite resource, predominantly to produce a beneficiated product. And so the studies that we did on that, we’re looking at a beneficiated solution. I think the market wants us to deliver the feasibility study to the magnetite project, you know, first and foremost. I think that’s the underlying value proposition for the company. That’s, I think, why our value proposition at the moment, despite the fall back in the iron ore prices is different to those companies that have all their eggs in the lower grade hematite and DSO basket. I don’t know that you can apply the same linear correction to Macarthur in the same way as you would, you know, look at those companies that are producing, you know, just that particular category of lower grade product.

But when we embarked on the process for conducting the feasibility study for the magnetite, you know, that was primarily our focus. Of course, when the iron ore price hit $230 a ton in, you know, April, people were saying, “Keep going with that feasibility study, but hang on. You’re basically, you know, pretty close to shovel ready. You’re moving hematite from Ullaring. How about you get some of that out?” You know, that’s something we still aspire to do. We also negotiated a mine gate [inaudible 00:10:56.128] with Golden West Resources for some product to move from theirs as well. We’re still continuing to push ahead with that. Obviously, that’s subject to the iron ore price, you know, stabilizing, but, yeah. Look, that would not be a beneficiated project so it would be subject to the market price stabilizing around iron ore. But we certainly do have an opportunity to look at other ways of bringing that Ullaring resource into production. And, you know, that may involve looking at, you know, a return to a beneficiated product at some point.

Stuart: Right. So that brings me to conversations I’ve had with a number of people when I mentioned your company. And they say, “Don’t tell us about iron ore, Stuart. Iron ore is very July, 2021.” And then I remind them that you have certain infrastructure advantages from some other listed companies in that space, plus you’re sitting on one of the better magnetite deposits. In a nutshell, that’s your two key competitive advantages in these somewhat challenging times we’re moving through for iron ore.

Andrew: Yeah, I think that’s right. I think when it comes to analyzing short to medium term impacts on the industry, I’m not joining the gaggle of people who are panicking and engaging in knee-jerk responses. I think there’s a case for arguing that what we’ve seen in the market at the moment in terms of the iron ore price fallback is a bit of an artificial overshoot in the last several weeks. I expect that we’ll probably see some…it’s just my personal opinion, we’ll see some rebalancing and settling into quarter four and during quarter one next year. I don’t think we’re gonna see a return to the prices in the 200s, but I think there’s a need to put the current correction into perspective relative to where iron ore prices have been over the last few years. I mean, iron ore’s still trading above pre-COVID levels for a start. And even with the current correction, the 12-month average for 62% iron is still around $166 a ton. So where we’re at at the moment, we’re basically back at where we were around September/October last year. We’re not lower than that. We’ve just come off super normal highs. And as I said before, I think the encouraging thing for me when I look at Macarthur is my belief that our magnetite project fundamentals, in particular, will be proven to remain very [inaudible 00:13:06.125] below the current spot price levels and that’s because we’ve got a premium high-grade product that fits with the coming grade steel revolution.

Stuart: Right. Well, Andrew Bruton, well done on what you and your colleagues have achieved in Macarthur in the brief period of time you’ve been listed here on ASX. Keep up the good work and get us that definitive feasibility study as soon as possible.

Andrew: Thanks very much, Stuart. Appreciate the opportunity to talk to you.

Stuart: Thank you.