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Denham Capital invests in North Island iron sands

United States-based private equity firm Denham Capital Management has taken a stake in company Trans-Tasman Resources (TTR), which is working toward ironsand mining offshore from the North Island west coast.In a statement from the two companies today, Den

Mon, 12 Apr 2010

United States-based private equity firm Denham Capital Management has taken a stake in company Trans-Tasman Resources (TTR), which is working toward ironsand mining offshore from the North Island west coast.

In a statement from the two companies today, Denham director and head of metals and mining Bert Koth said TTR was in an outstanding position to help meet an expected global shortage of iron ore.

"Its operating and capital costs will be a fraction of those for land-based mining and its transport logistics suffer none of the constraints and costs faced by many, if not most, other iron ore projects."

TTR managing director Paul Berend said the partnership with Denham would enable TTR to fast track the development of its project without the costs and distractions associated with an early initial public offering (IPO).

The initial investment of capital by Denham would enable TTR to prove the "extraordinary" potential of the mineral resource, Mr Berend said.

That would require additional exploration work, including extensive off shore drilling.

Today's statement said TTR, set up in 2007 and with offices in Wellington and Perth in West Australia, held a prospecting permit covering 6319sq km of seabed in two offshore areas.

TTR's initial prospecting work, backed by a mineral resource model derived from a magnetic survey and more than 200 surface and core samples, suggested that its tenements could contain a "very large and very low cost" iron ore resource.

TTR was considering an offshore dredge mining operation combined with an offshore beneficiation plant located on a fixed rig. Ironsand would be dredged from the seabed, processed in the beneficiation plant, then slurried to a vessel for shipment to Asia, or shuttled to a dedicated local onshore steel mill.

TTR executive chairman Bill Bisset said Denham had taken a minority share which could rise to about 48 percent over time. He would not say how much money would be involved in the deal, other than that it was millions of dollars.

TTR's investors had already spent several million dollars of their own funds on the venture, and the intention was now to find a "sweet spot" in the prospecting area.

The company would then invest in extensive modelling, which was where the Denham funds would come into play, Mr Bisset said.

A trial mining area could be established within about 24 months to prove the material was an acceptable feed stock.

If everything went well, including social, cultural and political issues, potentially TTR could have a modest 5-10 million tonne a year operation in three to five years, providing 400 to 500 direct jobs.

Large scale mining of ironsand would have "absolutely huge" benefits for New Zealand, with work done so far indicating there were billions of tonnes of ore on the seabed, Mr Bisset said.

TTR was now looking into the molecular structure of the ore so it could be modelled in a blast furnace.

"We're starting to select a few potential customers that we might work with, and these guys are all interested to contemplate alternative supply. So we're setting up those sort of relationships to have a look at the chemistry, have a look at how it might work."

That would take some of the next year or two to work out, he said.

With the potential growth of the middle class in China and India, new sources of iron ore were being sought around the world.

Other groups with permits to explore the New Zealand seabed for iron ore include big mining groups Rio Tinto, Fortescue Metals and Sinosteel.

Mr Bisset said supply of iron ore was facing constraints around the world.

"The issue in Australia, for example, is that already the rail lines are pretty well full, ports are pretty well full," he said.

"For a flourishing offshore dredge mining operation in New Zealand, yes there's costs but you don't have to build a railway line, you don't have to build a port. These things are massively expensive and they take years."

TTR was staying private for now because it was at an early stage, and not at the point where the market was probably ready to invest, particularly in this country which was not familiar with early stage mining projects.

It could look at listing in future among several options that would enable New Zealanders to invest while also tapping global markets.

"We're going to need hundreds of millions of dollars to develop mines."

TTR's prospecting licence is in two offshore zones along the North Island west coast, each 22km wide. The northern zone runs from the Waikato River to a point north of the Mokau River, while the southern zone is from southeast of Opunake to near the Rangitikei River.

Mon, 12 Apr 2010
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Denham Capital invests in North Island iron sands