Iron Peak Game Changer: the well-received by the market mineral resource update regarding the Iron Peak deposit represents significant improvements affecting the Razorback Iron Ore Project. Beyond the increase in tonnage to 503 million tonnes (up 20%), the increased mass recovery of 19.4% (up 15%) makes it the highest grade deposit available to the Project. Metallurgical testwork completed to date indicated that the Project is able to produce DR-grade products attracting higher price premiums.
New Mine Development: the development of the Iron Peak mineral resource takes now precedence over the Razorback deposit bringing with it improved Davis Tube Recovery (DTR), superior metallurgy and higher value products.
Economic Impact: starting the mine with the development of the Iron Peak mineral resource makes perfect economic sense and should add value particularly in the early years, when the project needs it the most.
Massive Mineral Resource: the Razorback Iron Ore Project combines a globally significant mineral resource with enviable characteristics: 6.0 billion tonnes inclusive of Ironback Hill and Muster Dam a very low strip ratio of 0.13 (with no pre-strip) and low deleterious elements (silica, alumina and phosphorus). Overall, this massive resource may translate to a mine life in excess of the 45 years currently envisaged in development studies.
Competitive Advantages: the results of our previous benchmarking (based on the 2022 Expansion Study) indicated that the Razorback project benefits from a reasonable capital intensity with the longest initial mine life among its peers. Profitability of the project was one of the best. We expect those economic parameters to improve further with the addition of Iron Peak.
From a steel manufacturing perspective, MGT’s magnetite is a high-grade product with grade of 68.5% Fe and low impurities highly sought after by steelmakers to increase productivity, provide efficiencies & reduce emissions.
Development Options: given the increased mineral resource in terms of both size (6.0 billion tonnes and growing) and quality (DR grade), the optimisation study released on 20th March 2023[GB|MM1] considered an initial 5 Mtpa concentrate production, increasing to 10 Mtpa a few years later (versus a previously envisaged 3 Mtpa to 7 Mtpa development scenario).
Government Support: the Razorback project fits well with the State Government’s vision of becoming a leading global supplier of quality magnetite products for steelmaking. It is also worth noting that the financial contribution (royalties, corporate taxes, payroll taxes, excise duties, income taxes) from the project will be outstanding, estimated by a recent analysis report from BDO at $31 billion over 30 years including $1.6 billion for the South Australian Government and $3.8 billion for the Australian Government.
Green Steel: as the expectation of cleaner, greener steel production becomes further embedded in the global narrative, MGT magnetite products offer a viable alternative to Direct Shipping Ores (DSO), for which most of the high-grade deposits are now significantly depleted. Its production will also be assisted by renewable energy making it even greener and more competitive.
Strategic Investors: a number of parties have been given access to a data room to undertake their due diligence of the Razorback project. One can expect some agreement with one or more of them during 2023.
Key Share Price Catalysts: the release of the Optimisation Studies delivering DR products should intensify the discussion with off-takers and project partners leading to project development pathways and funding, which will significantly de-risk the project and improve MGT’s value further.
MGT Valuation: there are certainly a lot of positive developments in favour of MGT’s project. Overall, we expect the project economics to improve quite significantly and look forward to the release of the financials to update our figures and valuation accordingly.