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Radar Iron to acquire stake in Queensland high grade DSO project


Radar Iron (ASX: RAD) has plans to acquire a 51% interest in the Mount Ruby Magnetite deposit in the Innisfail district of Far North Queensland from private company Developed Iron Ore.

Significantly, this project offers the potential for near term and substantial cash flow for Radar.

Mining of the high grade direct shipping magnetite ore is planned for the second half of 2013 with approvals in place or pending.

Mt Ruby lies within 120 kilometres trucking distance from the port near Innisfail.

Developed Iron Ore has already completed project evaluation and mining studies on the project and agreements are in place to enable transport including highway trucking and export through the port of Mourilyan.

Other approvals already in place or pending allow an initial mining rate of 600,000 tonnes per annum with mining slated to begin in the December quarter 2013.

A heads of agreement is in place for allocation at Port Mourilyan of two 45,000 tonne shipments per month with the potential for further allocations. Space at the port has also been granted for the stockpiling of iron ore.

Providing the exploration upside, a target has been defined for the high grade magnetite mineralisation at Mt Ruby of 8 to 27 million tonnes at 57% to 68% iron.

The mineralisation is open to the west and north and planned drilling in coming months will test for potential extensions.

Preliminary financial evaluation of the project suggests that total development capital required is $15 million with production cash cost estimated at $60 per tonne FOB. These numbers will be validated and refined in the due diligence process.

Given these expected production costs and sales value of the product, an early payback is considered likely.

Mt Ruby geology

The Mt Ruby Project magnetite is a skarn deposit, generated from the intrusion of granite into a massive limestone with the subsequent development of high grade magnetite.

The magnetite is exposed on surface as a low lying ridge of about 200 by 80 metres.

The mineralisation dips under shallow cover outside the outcropping ridge with geophysical exploration indicating the deposit could total 500 by 300 metres in size.

The orebody has an interpreted minimum thickness of 60 metres based on two historical drill holes which ended in magnetite.

Ninety three geochemical sampling results from surface, from a historic trench and down a 20 metre deep shaft at Mt Ruby, confirm the presence of high grade magnetite with results between 52.5% and 69.5% iron with an average grade of 64.2%.

The samples were consistently low in silica, alumina, sulphur and phosphorus.

Metallurgical work has shown that the lower grade zones can be readily beneficiated to a high grade product.

Acquisition terms

Following a $100,000 option payment Radar has until April 30 2013 to complete due diligence, during which time it must drill 10 reverse circulation holes.

Upon successful due diligence Radar will pay $5 million to Developed Iron Ore and commit $3 million to the development of the project, after which it will acquire a 51% interest in the Mt Ruby Project.

Following this the two companies will contribute to further development in accordance with their joint venture interests.

Radar will issue Developed Iron Ore $1 million shares on the definition of a JORC Resource of a minimum grade of 60% iron, as well as at the commencement of mining.

Road ahead

Following the successful due diligence process, Radar will work with Developed Iron Ore to rapidly obtain all approvals and finalise contractual arrangements aimed at enabling mining to commence in 2013.

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