In March, Steve Parsons and Mike Naylor, the executives behind the successful Richardson Street group of companies that includes FireFly Metals, were appointed as consultants of then-greenfields gold explorer Killi, while long-time associate Hamish Halliday was appointed as a non-executive director.

In a sign of what was to come, former Fortescue Metals Group CEO Nev Power joined Killi as non-executive chairman at the same time.

Earlier this month, Killi announced the A$20.4 million scrip acquisition of 80% of the Lodestone project from private interests associated with Parsons and Halliday.

While iron ore is often a game best left to the majors with deep pockets, Lodestone is no ordinary iron ore project.

Halliday said the first factor that set Lodestone apart was its location just 200km from the Port of Geraldton.

The project is immediately adjacent to grid power and a road and rail network leading directly to the port.

“We were up on site recently, myself and Nev Power, and we were standing on the discovery outcrop and we could literally see two power lines, a sealed road and a rail line that leads straight to a port with excess capacity,” Halliday said during a webinar this week.

“If you’re going to have a new iron ore discovery, you’re not going to get better than that.”

The project already has scale with a resource of 110 million tonnes at 33% Davis Tube mass recovery to deliver a premium 69% iron concentrate with low impurities.

The resource covers around 20% of the known magnetite mineralisation. 

“We’re looking to quadruple that (resource) in the next 12 to 18 months, so we’re fully focused on heading towards that half a billion tonne-type mark,” Halliday said.

Unique geology

Halliday said he had never seen a banded iron formation that could produce such a high-grade iron product.

“The metallurgy of this body is very unusual. I haven’t seen anything like it in Australia,” he said. “It’s 10 to 100 times coarser than its neighbours.”

Lodestone’s neighbours include magnetite mines owned by giant Asian steelmakers Ansteel and Baowu Steel.

“We get magnetite crystals like 5mm across which is 100 times coarser than a standard banded iron formation deposit,” Halliday said. 

“The nature of its geological setting has delivered us the opportunity to produce a very high-quality product, but very importantly, at a coarse grind size, so you’ve not got all that grinding down to very fine bug dust to get a product. 

“The magnetite liberates from the silica here very easily and that gives us some real value drivers. 

“Obviously that allows us to have a much simpler plant design, which is less capex up front and obviously we can also leverage off that infrastructure, so we don’t have to build anything outside the mine gate.”

Killi expects the product from Lodestone to attract a serious premium.

“Upwards of 40% over the 62% price,” Halliday said. “So, if you’ve got an orebody that’s capable of producing this sort of product, you’d be mad not to get into the electric arc furnace supply market because that’s where you get the big premiums.”

That’s where Power’s experience will be invaluable.

“Probably less known about Nev’s background is he also ran electric arc steel production for Smorgan Steel for about a decade and it’s that high-end part of the market, that low-carbon steel production, which is where the world’s headed in in the steel market,” said Halliday. 

“It’s that market that we want to pitch this product into because it fits perfectly due to its high purity and high value nature.”

Drilling to start

As part of the transaction, Killi raised A$15 million, which will give it cash of around A$18.5 million to advance Lodestone.

It was a decent chunk of cash to raise for a company valued at just A$50 million, but the Richardson Street group of companies has raised around A$1.74 billion of capital in the past six years.

Following completion of the placement, expected in July, Parsons will hold around 14.6%, Halliday will hold 13.7% and Power will hold 4.6%. 

A 20,000m drilling program will begin at Lodestone shortly.

“That’ll morph into 40,000m. We don’t intend to be stopping on the drilling front,” Halliday said. “We’ve already got scale, but we’re not stopping there.

“We’re going to add serious tonnes and we’re not going to be shy with the drill bit over the coming months and quarters.”

Halliday said there will be plenty of news flow over the remainder of the year.

“Lots of resource upgrades, lots of news flow around metallurgy and obviously we’ll be head down and heading towards a final investment decision as soon as we possibly can.”