PERTH (miningweekly.com) – Perth-based Azure Capital is confident of securing a joint venture (JV) partner for ASX- and TSX-listed IMX Resources on its Mount Woods magnetite project by the end of the year, or at least being in advanced discussions by that time.

Azure was appointed by IMX earlier this year to assist the company in devising development options for the South Australian project, which is the company’s main focus following its recent $60-million JV with MMG at its Tanzanian nickel project.

IMX is hoping to have the project in production by 2016.

Azure associate director Chris Holman told Mining Weekly Online on Monday that discussions with possible JV partners were progressing well, with IMX and Azure planning a trip to China later this month to stir up further interest.

A June scoping study investigated production rates of 1.8-million tonnes a year, 2.5-million tonnes a year, 4.7-million tonnes a year and 9.4-million tonnes a year. Despite the significant returns on a higher yield operation, IMX opted for a 2.5-million tonnes a year base case development, stating that it balanced capital expenditure requirements with the ability to finance and also used existing rail and port capacity.

Under this development option, the project will require a capital investment of A$294.6-million and will have a project life of 25 years.

“The project has a large development case, which is comparable to a number of other large magnetite projects in Australia. But what we have really focused on is the smaller 1.8-million-tonnes-a-year and 2.5-million-tonnes-a-year cases that will attract a wider pool of potential partners and allow an entry point into the magnetite market that does not require billions of dollars in investment,” Holman said.

He added that the feedback from possible investors regarding the smaller-scale operation had been very positive.

“Investors' perception of magnetite in Australia has been tainted by the cost blowouts and ramp-up issues at some of the large-scale development projects. The fact is the large funding requirement and scale of development come with corresponding increased risks. We have seen interest in IMX being able to establish a smaller-scale project where you are only producing a couple million tonnes via a simple processing route, which requires materially less capital.”

Holman added that the project’s future access to its existing operational rail and port infrastructure was also a bonus and was the key to the project’s competitive capital intensity per annual tonne.

Regarding the structure of the possible JV agreements, Holman noted that while IMX would prefer a farm-in arrangement where the partner would spend funds at the project level, the company was “quite flexible” in its approach.

“Rather than IMX taking cash off the table, we want partners to progress the project and earn an equity stake that is acceptable to both parties. Each investor will have their own threshold of how much they want, so we are flexible in those discussions.

“It also comes down to what each party can bring to the table outside of just the initial funding. IMX is very keen on the project and wants to maintain an interest going forward, as there is a lot of value in the project for shareholders, but the project will require capital commitments that the company can’t fund themselves. So it requires a partner to come in,” Holman said.

It has been estimated that up to A$25-million would be required to complete both the prefeasibility and the definitive feasibility study on the Mount Woods project.

Meanwhile, Holman pointed out that the long-term outlook for the magnetite market remained positive, as Asian demand for the product continued to soar.