Iron ore weakness to continue into 2025 and beyond, says Fitch Solutions’ BMI
Looking beyond 2024-2025, BMI analysts maintained their view that iron ore prices will likely follow a multi-year downtrend.
In spite of falling iron ore prices, a group of well known insiders from Oceanic Iron Ore Corp have reached into their own pockets to move their Hopes Advance project in Quebec’s Labrador Trough forward.
We had the opportunity recently to connect with Oceanic’s chairman and former president of Teck Resources, Steven Dean, and Oceanic’s president, Alan Gorman, an experienced mining operator who was last EVP at Goldbrook Ventures before it was taken out by its Chinese partner.
As followers of our posts may know, your editors here at CEO.CA are long Oceanic Iron Ore Corp. We feel the company’s Hopes Advance project carries strong economics: However, the company needs a development partner to take it to the next level. Management is actively courting partners at this moment, but until a partnership event occurs, the stock may remain in a trading range. It may take a few months, or a few years to secure the backing, but if the company can manage to do so, it may be very rewarding to shareholders.
Additionally, in considering the story, investors will need to cast aside the current negative sentiment on China, and take a sobering view of the global iron ore markets.
At a glance, Oceanic is currently valued by the market at ~$33 million, and its most recent corporate presentation announced the Hopes Advance to carry a pre-tax NPV of $5.6 billion. Additionally, the company has completed a recent 3.2MM financing in which the majority of funds came from insiders.
During our interview, we asked Dean to describe the steps going forward for the company. He indicated that, “The focus for us right now is to continue to engage with current and prospective strategic partners…a number of Chinese and Asian steel companies have already invested…in the Labrador Trough. What we’re wanting to do is apply a similar investment model to our project, whereby our strategic partner comes in, acquires a piece of the project directly, and we use the proceeds…[in] a financing which would provide the balance of funding for the development of the property. As part of that, the strategic partner…would typically also bring development finance—often from state-owned banks.”
He further added that, “The model is tried and true, and what we’re doing is trying to find the right partner for us to develop this project.”
In speaking on the operational aspects of the project, and why he feels Hopes Advance is unique, Gorman said, “There are a couple of things that differentiate it from other projects…from mine to port is a simple process…the mining involves a very low strip ratio…[iron] concentrate is delivered in a [slurry] pipeline to a de-watering plant adjacent to the port, where it’s dried and stored, and then loaded onto ships…[that] results in low quartile operating costs of $30 [per ton].”
(Here is an animated presentation of the production process shown on Oceanic’s corporate website.)
“This bus has arrived and left every stop on time,” Gorman added.“We’ve got a few more stops to make before we get this into production…[and] we’re committed to moving forward and delivering the next milestones with the Hopes Advance project.”
It remains to be seen what occurs next with Oceanic Iron Ore Corp. If the company can attract the right development partner, and ultimately, take this project into production—the market cap may respond very favorably.
To listen to the interview in its entirety, click the following MP3 link and/or save to your desktop:
Disclaimer: We own shares of Oceanic Iron Ore Corp. This is not investment advice. Talk to a licensed investment advisor and do your own due diligence before buying or selling any security.
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