Article by courtesy of Jung-hwan Hwang Korea Economic Daily Global Edition.
South Korea’s top steelmaker POSCO and Hancock Prospecting Pty Ltd, a leading Australian mining firm, have agreed to restart a long-dormant iron ore mine development project as the prices of the steelmaking raw material soar.
According to industry sources on Thursday, the two companies joined by their other project partners have embarked on a feasibility study on the Hardey iron ore project in the West Pilbara owned by the Australian Premium Iron (API) joint venture.
Due to poor market conditions, the Hardey project has been shelved since the API joint venture was created in 2010. But the JV stakeholders are restarting the project, prompted by rising iron ore prices, to secure a stable supply of the raw material.
POSCO, the world’s sixth-largest steelmaker, invested about 200 billion won ($163 million) in the API joint venture for a 24.5% stake. As part of the deal, the Korean company receives 9.8 million tons a year of iron ore from the API-developed Australian mines. The volume represents about 16% of POSCO’s annual iron ore needs for steelmaking.
POSCO and Hancock Prospecting are joining forces with China Baowu Iron and Steel Group, the world’s largest steelmaker, to develop the Hardey project, located near the Roy Hill mine in the Pilbara region of Western Australia.
The Hardey project is near the Roy Hill mine in Pilbara, Western Australia
ALREADY PARTNERS IN ROY HILL MINE
POSCO and Hancock are already partners in the Roy Hill mine, the world’s single largest iron ore mine with indicated and inferred reserves of 2.3 billion tons. The Korean company invested 1.3 trillion won to acquire a 12.5% stake in Roy Hill in 2010.
The development of the Hardey project was originally estimated at $7.4 billion (A$10.3 billion), but the cost will likely dwindle as the developers have agreed to use the Roy Hill railway, port and other infrastructure for exports, removing the need to build new rail lines and ports.
POSCO is expected to invest about 1 trillion won in the Hardey project, which is said to contain over 150 million tons of ore with iron content above 60%, according to industry officials.
POSCO and its partners expect to initially produce 40 million tons a year from the Harley project starting in the fourth quarter of 2023.
The revival of the API’s Hardey project comes amid the boom in iron ore prices.
Global iron ore prices (Courtesy of POSCO)
When POSCO invested in the Roy Hill project in 2010, global benchmark iron ore prices hovered around $130-$170 a ton, but tumbled to the $50 range by 2015.
However, iron ore prices rebounded to as high as $230 last year as the global competition to secure a stable supply of the raw material intensified amid a trade dispute between China and Australia – the world’s largest steel manufacturer and the No. 1 iron ore exporter, respectively.
Iron ore prices currently move in a range of $130-$150.
AGGRESSIVE OVERSEAS INVESTMENT
POSCO has invested in more than 30 overseas projects to develop resources, starting with an investment in an Australian coal mine in 1981.
Last year, the Korean company said it aims to raise its annual molten iron production volume to 60 million tons by 2030 from 40 million tons in 2021.
Iron ore laid out in Roy Hill mine, Pilbara, Australia
It requires about 60 million tons of iron ore to produce 40 million tons of molten iron.
From the Hardey project alone, POSCO is expected to secure 10 million tons a year of iron ore, raising the company’s self-sufficiency ratio to 50% from the current 40%.
Higher iron ore prices have also boosted POSCO’s gains from its investment in the Roy Hill project.
The company is said to have earned more than 500 billion won in dividends from its Roy Hill investment last year.
“We expect enhanced profitability from the Hardey project, which is also an important source of iron ore for us at a time when countries are weaponizing raw materials as you can see in the war between Russia and Ukraine,” said a POSCO official.
