On November 27th Magnetic Resources (ASX:MAU) released a first economic assessment of their magnetite project approximately 100km NE of Perth. The conceptual study performed by consulting engineers Energium assessed two different scenarios, namely a 1 Mtpa and a 2Mtpa. Even though both these scenarios resulted in a satisfying IRR of 23% and 26% respectively we remain skeptical how a small company (with a market cap of less then A$5M) like
Magnetic Resources will fund the capital expenditures necessary, as they will need at least A$160M for a 1Mtpa scenario. Fortunately the fact they are close to an existing railway and to port facilities might attract Asian partners to develop this project.
It will be interesting to see how this story develops in the future and we hope Magnetic will be able to move this project forward.
Disclosure: The author holds no position in Magnetic Resources NL. Please see our disclaimer for current positions.
