Australian mining firm Mineral Resources (MinRes) could redefine the economics of stranded iron ore projects globally, by running battery-powered autonomous trucks at an operating cost comparable to rail to underpin its 35mn t/yr Onslow project.
MinRes and its joint venture partners, Chinese steelmaker Baowu and US investor AMCI, plan to reduce the operating cost of trucking to close to that of rail, which will reduce the barrier to entry for new iron ore mining firms and flatten the cost curve, reducing the marginal cost of supply.
Smaller mining firms that opt to truck iron ore tend to be marginal suppliers in the seaborne market, often closing when iron ore prices are low and reopening when they rebound. This is in part because of the high cost of traditional trucking compared with rail, a difference that has become more pronounced as diesel prices have increased.
MinRes, Baowu and AMCI signed off on the A$3bn ($2.06bn) Onslow iron ore mine, port and haul road project on 29 August, with a target of hauling the first ore by December 2023. Baowu has agreed to take 50pc of MinRes' ore from the project, with an option to take a further 25pc, despite the average grade of ore likely to be around 58pc Fe for the first few years.
The project will be the first in Australia to use fully autonomous 320t capacity trucks to haul the ore 150km to port on a private haul road. This will significantly cut the haulage operating costs from around $28/t to less than $10/t, MinRes chief executive Chris Ellison said. It will make it cost competitive with rail, without the need for the massive upfront capital costs required to build rail lines.
The lack of access to rail lines has reduced competition in iron ore mining, because it is hard to justify the significant upfront investment to add incremental tonnage. Building new rail is high risk, requires major mining projects and access to a lot of capital.
MinRes and other small- to medium-sized iron ore mining firms in Australia are struggling with reduced-to-negative operating margins because of rising costs, shortage of labour, a rebound in the Australian dollar and weaker iron ore prices.
MinRes, which also operates lithium mining and mining services businesses, reported a net profit of A$400mn for the year to 30 June, down from A$1.1bn a year earlier, partly because of tighter iron ore margins. It expects to ship 6.7mn-7.3mn t of iron ore at a cost of A$85-95/t fob Geraldton from its Yilgarn operations and 10.5mn-11.5mn t at a cost of A$65-75/t fob Port Hedland from its Pilbara operations in 2022-23. In both cases it is targeting 20pc iron ore lump to reflect good premiums for lump.
