Todd Corporation, the wealthy private Wellington firm best known for its large stake in oil and gas, has set up a minerals arm, which has made a canny investment in a Pilbara iron ore company.
Todd has bought a 20 percent stake in Adelaide-based company Flinders Mines, which has discovered a 1040 million tonne hematite iron ore resource in the rich Hamersley Ranges. The two biggest Australian iron ore miners, Rio Tinto and BHP, mine to the west and east respectively of Flinders’ prospect.
The A$1 billion project aims to produce 25 million tonnes of ore a year, making Flinders Australia’s fifth largest iron ore producer.
Todd’s original Pilbara investment came before iron ore prices took a plunge of around 50 percent this year, close to loss-making levels for most junior miners like Flinders, as the world’s top four producers have flooded the market with low-cost ore.
The Flinders mine has been a stranded asset 200 kilometres from a coastal port, but Todd has also shrewdly invested in a railway and port project that will be the vital link in moving ore to an export port. Todd has invested in the Balla Balla project with joint venture partner, Rutila Resources. Todd has a 32 percent interest in the Balla Balla joint venture (BBJV) and a 46 percent interest in Rutila.
The Rutila company controls a separate lower grade magnetite iron ore project just a few kilometres from the coast, but has found it difficult to export economically.
However Rutila has developed a plan for a shallow-water port that would load ore onto low-draft barges which would trans-ship the iron ore on to deep draft carriers offshore – a method already used by other companies along the West Australian coast.
The Balla Balla port and railway will cost another A$3.3 billion. An expanded alliance agreement for construction and operation of the vital transport infrastructure will allow both Flinders and Rutila to export their products to market.
But with export iron ore prices again dropping below US$70 a tonne by the end of 2014, Todd took the opportunity to double its stake in Flinders from 10 to 20 percent for just A$4.5 million. Flinders’ share price had slumped mid December to only 13 cents a share.
Todd’s first Pilbara iron ore investment could be in for interesting times ahead.