Hancock Prospecting takes the Mt Bevan plunge

Hancock Prospecting is looking to expand its iron ore portfolio by earning into the Mt Bevan project in the Central Yilgarn region of Western Australia.  Through its wholly owned subsidiary, Hancock Magnetite, Hancock will make an initial investment of $9 million to acquire a 30 per cent interest in the project.

By funding the pre-feasibility study (PFS) costs of Mt Bevan, Hancock has the potential to earn an additional 21 per cent interest, resulting in a 51 per cent stake in the project.  Current owners of Mt Bevan, Legacy Iron Ore (60 per cent) and Hawthorn Resources (40 per cent), would hold a 29.4 per cent and 19.6 per cent stake respectively following the completion of the PFS.

Located 250 kilometres (km) north of Kalgoorlie and 100km west of Leonora in WA, the Mt Bevan project is situated on the large tenement E29/510, which holds 1170 million tonnes of magnetite resource at a grade of 34.9 per cent iron (Fe).  As part of Hancock’s initial $9 million investment, $8 million of cash will be paid to Legacy and Hawthorn in proportion with their interest in the project, with the additional $1 million used as working capital in the JV.

Once the PFS is completed, and the desired outcomes have been established, additional programs will be undertaken with the intention to advance the project into a bankable feasibility study.

Analyst predicts steeper decline for iron ore prices

Lower steel margins and strict production controls in China are driving down iron ore prices, according to a report by CRU Insight.  The price of 62 per cent ore fines imported to China’s Qingdao port was trading at $US147.65 ($202.95) per dry metric tonne on Wednesday, a slight improvement after last week’s significant falls.

Yet it remains a far cry from the record high of more than $US230 per dry metric tonne recorded in May.  CRU Insight principal analyst Erik Hedborg and senior analyst Richard Lu, discussing iron ore prices in a new report, said Chinese demand for spot volumes has led to sharper than expected declines.  The report found that China, which accounts for around 75 per cent of seaborne demand, has reported lower steel margins and reduced steel output.

“Steel margins have declined, especially for longs producers that are struggling with weak demand from China’s construction sector,” the report stated.  “Many steelmakers, especially smaller ones, are now losing money on every tonne of steel they are producing.”

Chinese steel makers have been told to reduce output after a record 290 million tonnes produced in the second quarter of 2021, which has caused an oversupply of iron ore at steel mills.  Australian iron ore producers such as Rio Tinto have also faced supply issues, resulting in lower shipments compared to the previous year.  However, CRU doesn’t expects prices to drop to the $US60-per-dry-metric-tonne low that was witnessed during 2015 and 2016.