Billion dollar ironsands IPO in prospect
Developers of an offshore Taranaki ironsands mining project say it could be greenlighted within the next three years, and require infrastructure costing between $500 million and $1 billion.
Such a large investment in what could prove to be New Zealand's largest single source of exports would lend itself to an initial public offering, Bill Bissett, the chairman of TransTasman Resources, the group investigating the ironsands opportunity, told BusinessDesk in an interview.
TTRL began investigating the global scale ironsands deposits, most of which lie within the 12 mile nautical limit off the coasts of Taranaki and Whanganui, in 2007.
It announced in April that Denham Capital, a United States private equity fund linked to the Harvard Endowment Trust, had become a 48 percent shareholder.
Local broker McDouall Stuart also helped find a group of wealthy New Zealanders who have invested "some millions" in the exploratory phase for the project, on which both Government and Opposition politicians have been kept fully briefed.
TTRL has kept a low profile to date, while spending substantial sums understanding the size of the resource, its potential contribution as a world-scale feedstock for steel-making, and consulting with local government, Maori and other stakeholders.
It is optimistic that it will be able to obtain resource consents for undersea operations similar to the extraction of Taharoa ironsands off beaches further north, because the ironsands are far from shore and tend not to support underwater life.
The ironsands could serve as feedstock for a 10 million tonne a year steel mill, either in Asia or New Zealand, and could leap-frog land-based extraction opportunities elsewhere in the world because marine dredging and processing requires far less capital equipment than onshore mining.
"The key attraction for ironsands in New Zealand is the lack of infrastructure required, which is so expensive for land-based operations, and has lead times of seven to eight years," Bissett said.
Estimated capital cost per tonne of capacity of an offshore New Zealand mine could be as low as US$14 a tonne, versus US$100 a tonne for BHP and Rio Tinto mines in Western Australia, with the absence of need for a deep sea port or rail facilities being major advantages.
An initial economically recoverable resource of about 1.2 billion tonnes of ironsands at 60 percent iron content, mostly off the south Taranaki-Whanganui area, is in relatively shallow waters, and is available in deposits ranging from 20 metres to 140 metres deep.
A further 9 billion tonnes of recoverable sands, at 60 percent iron concentration, may also be available, and substantial volumes of vanadium and titanium are also available as valuable by-products.
Offshore dredging would require no chemicals or tailings dams and would be located well away from reefs, rocky outcrops and other environmentally sensitive features, TTRL says.
It would target paleolithic river mouths and beaches from ancient times when sea levels were lower.TTRL says it could send the processed material as a slurry for shipment direct to Asia, or shuttle it to a dedicated local onshore steel mill.
"It could rapidly become New Zealand's greatest export industry, in whatever form that might be," Bissett said.
"It would be wrong to say it's simply dug out of the ground and put on a boat. The beneficiation process (offshore dredging and processing of iron ore feedstock) in itself is a significant process."
There is a lot of value added before you start talking about a steel mill."
However, while TTRL would be willing to develop the offshore processing facility, it did not see itself as the developer for a steel mill, which could cost between $3 billion and $4 billion, Bissett said.
If developed in New Zealand, such a plant could employ 3000 New Zealanders directly and be a customer for high grade New Zealand or Australian coking coal.
The extraction process is also exo-thermic, meaning it throws off additional energy which could potentially be used to generate electricity.