While the bulk commodities might be considered “boring” and the domain of the majors, there are still opportunities for plucky juniors to try their luck.
After a stint in lithium, Atlas Iron founder David Flanagan has returned to his roots with Arrow.
Arrow holds the Simandou North iron ore project in Guinea, a project, as the name suggests, that sits adjacent to Rio Tinto’s Simandou iron ore development.
“People know where we are,” Flanagan told The Hole Truth podcast this week. “The geology from that tenement runs onto ours.”
Simandou, a joint venture between Rio and Chinese companies including Chinalco and Baowu, has resources of 2.83 billion tonnes at 65.8% iron.
First production is expected next year ahead of a ramp-up to 60 million tonnes per annum of iron ore by 2028.
The project will be the largest-ever in the iron ore sector with the combined mine, port and rail infrastructure expected to cost US$21 billion.
Arrow has an exploration target for Simandou North of 281-716Mt of Simandou formation oxide banded iron formation at grades of 33-46% iron, based on 530 holes.
The company has completed positive preliminary metallurgical test work which produced low alumina hematite fines grading 61-64% iron from a simple wet gravity process.
Last week, Arrow signed a non-binding memorandum of understanding with Baowu subsidiary Baosteel Resources.
The MoU provides a framework for the pair to negotiate a mine gate iron ore sales contract.
The framework includes provision for all key commercial elements, including iron ore pricing, freight, ore haulage, ore handling, ship loading and government royalties.
Simandou North is just 25km from the new Simandou railway line under construction.
Arrow is aiming to complete a scoping study next year.
Bauxite
A newer addition to the Arrow portfolio is the Niagara bauxite project in Guinea, acquired earlier this year.
It comes amid tightness in the global bauxite market. Spot alumina prices have roughly doubled this year and are sitting at record highs.
Like many commodities, China controls the bauxite market but its domestic production is dwindling.
“Environmental approvals and inspections are making it harder for Chinese refineries to restart production,” ANZ Research reported last month.
“This is being exacerbated by a decline in the ore grade. China’s bauxite production has subsequently plunged in recent months, with output in Shanxi expected to drop by 27% year on year in 2024, while Henan will see a 10% decline.
“The bauxite supply deficit is evident, as the year-on-year increase of 11Mt in imports from January to June is insufficient to bridge the gap, resulting in stockpiles falling to a near 28-month low.”
Niagara, 100km from the Simandou rail line, was formerly owned by Vale and was sufficiently advanced that it had foreign (ie non-JORC compliant) resource estimates.
Arrow was able to quickly establish an exploration target of 170-340Mt at 40-46% alumina.
The company kicked off the first drilling campaign at Niagara this week with three drill rigs.
The 2000m, or 150-hole program, will focus on three of the nine targets, which were selected for their accessibility, proximity to the rail corridor and lower cost startup potential.
Arrow will also collect bulk samples to test with potential customers.
The company wants to move quickly to a maiden resource.
“The intention is to drill this and produce a scoping study next year,” Flanagan said.
Two-horse race
Despite its modest market capitalisation of just A$13 million, Arrow believes it has two real near-term development options and will advance them at the same time.
“It’s a classic speed to market strategy,” Flanagan said.
“It’s all about capital light, light, light. Our strategy is about starting the cheapest viable mine possible.”
And the strategy is tried and tested as it was the same at Atlas Iron, which is now owned by Gina Rinehart’s Hancock Prospecting.
Though more than a decade ago, Flanagan says Atlas’ first Pilbara iron ore mine, Pardoo, cost about A$13 million to bring online thanks to the use of third-party infrastructure.
“And the Pilbara is probably the most expensive place in the world to operate,” he said.
The second mine didn’t cost much more at A$15 million.
“By the time we were running our second mine, we were making A$20 million a month,” Flanagan said.
According to Flanagan, there’s no reason Arrow can’t tread the same path with Simandou North and Niagara.
He’s agnostic about which project will be advanced faster though work will continue at pace at both.
“We’re not going to die wondering,” he said.
