Trans-Tasman Resources seeking investors for iron sands project

JAMES WEIR
Last updated 05:00 17/03/2011

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Trans-Tasman Resources says it could start mining iron sands off the Taranaki coast in two to three years, if all goes to plan, and it can raise hundreds of millions needed for the mining development.

Small, Wellington-based exploration company TTR says there is an estimated 102 million tonnes of "inferred resource" of iron ore in its licence area off the Taranaki coast and the company said yesterday its prospecting was likely to be "worthwhile".

A testing programme is under way off the Wanganui coast with the aim of converting more of the potential into "JORC" (Joint Ore Reserves Committee) inferred resources. JORC figures are seen as more credible than internal company estimates.

TTR said the "resource" figure was "very much a preliminary estimate over a very small percentage within the area currently pegged by the company." However, the company hoped further work would take the resource figure up to initial internal estimates of 360 million tonnes, and beyond.

TTR has already spent "double-figures of millions" so far on the project and has enough cash to keep going this year before seeking cash from investors, possibly late this year.

Trans-Tasman released details yesterday of its first official estimate of the iron ore concentrate at 60 per cent, which has been signed off by Golders Associates, an independent geological consultant.

TTR aims to mine 5 to 10 million tonnes of ore a year in two to three years.

TTR says a medium-term price for ore is expected to be about US$100 a tonne, compared with current high spot-market prices of US$150 to US$170 a tonne.

Mining 5 million tonnes at US$100 a tonne implies revenues of about NZ$680 million a year, but TTR has not yet given an indication of the potential operating costs.

The costs of development would be high, with TTR hoping to raise "hundreds of millions" from investors in both Australia and New Zealand.

More testing and exploration was needed, as well as environmental studies on the potential impact of offshore mining, before seeking capital. "We will be looking for capital late this year, early next year," TTR executive chairman Bill Bisset said.

TTR has already raised some money in New Zealand, but because it would need such large sums, would look to Australian investors because the investor pool in New Zealand was not deep enough.

"Exploration is at the more risky end of the risk profile and rightly so. You are not going to put your entire portfolio into that," Mr Bisset said.

The project could also lead to a large-scale steel mill in New Zealand to make use of the ore, but that could potentially cost $5 billion, and would probably need a big Asian backer, with most of the steel exported.

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New Plymouth is a potential mill site, but TTR has made no commitments about a site.

The country already has a large steel mill, the NZ Steel mill at Glenbrook, south of Auckland.

- BusinessDay.co.nz

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