Please tell me about Rogue Iron Ore.
Rogue Iron Ore Corp. (TSX: V.RRS, Stock Forum) is focused on developing an iron ore deposit and is well positioned to supply market demand in North America as well as overseas. Rogue’s property has unparalleled access to transportation, with excellent existing infrastructure in place. The project is situated less than an hour’s drive from the Timmins mining camp, along provincial highway 101. Historical work on the property in the 1960s brought the project to the feasibility stage.
We’re currently finalizing an agreement with U.S. Borax Inc., a subsidiary of Rio Tinto plc, to create a spinout gold company, Rapier Gold Inc., based on findings of high-grade visible gold found on a property adjacent to our flagship Radio Hill property. Rapier’s gold stake is one of the larger gold exploration properties in the Timmins Camp, an area that has produced in excess of 70 million ounces of gold to date.
Rogue also has a nickel deposit 35 km from Timmins, Ontario, situated next to Xstrata’s metallurgical facility and Liberty Mines’ nickel mill.
Why is iron an attractive commodity today and what are the drivers affecting its demand?
It’s an attractive commodity because of its demand globally, specifically in North America and Asia. It’s also the second largest commodity traded globally – after oil – and the fact that the price of iron has increased substantially over the last three years is certainly a desirable factor.
The demand really is due to global infrastructure development and the emerging economies, primarily in Asia. China and most of Asia are catching up to North America in terms of their infrastructure. They need iron (steel) to build their bridges, railways, sky scrapers, and they are running out of their own supply. China, for example, currently imports 61% of global iron ore and exports none of the ore they produce. We expect China to remain an iron ore price driver since although the growth of their economy has slowed to roughly 8% per year, that rate is still unquestionably high. Coupled with the fact that China’s iron ore reserves are facing increased costs of mining, while overall iron resource grades are declining, mining their own resources with its higher impurities is unfavourable to steel producers. Also of importance to Rogue is that some North American iron ore mines are within less than a decade from depleting their assets, leaving a potential supply shortage, creating a situation whereby a nearby, clean product with low Capex puts Rogue at an advantage.
What is your flagship project?
We are focused on developing the Radio Hill iron ore project. There has been extensive historic work completed on the project, both in terms of infrastructure development and also metallurgical test work.
Our 2012 drilling program, which totaled 10,447 meters and 43 holes, returned assay results that support the historic findings of the potential for clean, high-grade iron.
Why do you consider this project to have particular value?
The existing infrastructure represents a significant cost savings for project development. Being on the CN rail main line means transportation within North America is possible, particularly in the mid-west and surrounding regions of the United States, where most steel producers are located, and it is competitively advantageous. There are no other iron ore producers in Canada with this ease of access to these steel markets.
Further, natural gas is located nearby with relatively cheap and favourable conditions to install a gas line to our site. This could potentially allow Rogue to produce some desirable, higher content iron ore products, those which sell at a premium from traditional products such as fines and pellets, and with a significant reduction in emissions.
The property is surrounded by operating mines in one of the world’s top mining districts. The smaller time frame and relative ease expected with regard to achieving permits and First Nation agreements in order to progress toward production, is a further advantage.
So what infrastructure is currently available and why is this so important?
As I have mentioned, our project is very unique in that 3.5 km from the deposit, on the property, is the Kukatush railway siding, part of CN Railway’s mainline, so there are no capacity issues in terms of how much we can transport and it’s a straight shot to Hamilton, the Great Lakes and easily accessible to the wider North American market or to a deep sea port for international shipping. Having the mainline, siding and the loading facility at the nearby town of Foleyet means long-term transportation will not be a concern.
What distinguishes your Company from other iron ore companies?
Because of our infrastructure and easy access to market, we don’t necessarily need a huge deposit or large output to generate good margins. The infrastructure and cheap power enable us to look at large and small niche markets (two to eight million tons per year). We have many options that allow us flexibility in deciding the best course of action. Our ability to generate good margins on low output allows for minimal initial capital expenditures and a cash-flow, which we anticipate will have a fast pay-back period and allow for Rogue to self-finance expansion of facilities and output.
Other iron ore companies are faced with many infrastructure constraints, such as construction of lengthy rail lines (some of which will run over permafrost and require costly annual maintenance) and power lines. Natural gas access may also be unavailable to others, which limit their production to only a few iron ore products with less marketability. The time it will require some of these companies to bring their projects into production, often coupled with higher capital expenditures, gives Rogue a comparative advantage to secure financing and/or potential partners.
How do you intend to finance this project?
We have a few options to consider. Iron ore development requires one or more strategic partners who can take on a long-term contract for ore. There are a number of these companies in the Great Lakes region and during a pre-feasibility study we would look to secure such funding and partnerships. This is typically the course of action for iron ore exploration companies as the large steel producers have the deep pockets to fund our expertise (developing iron ore properties), which is essential to their securing a reliable source of product for their steel furnaces.
We have initiated discussions with a select few companies and will continue to expand our relationships as we move forward along the development process into pre-feasibility and beyond.
What other assets does Rogue have?
We have gold assets in Timmins and have signed a non-binding Letter of Intent with U.S. Borax Inc, a Rio Tinto plc subsidiary company, to form a spin-out gold company, Rapier Gold Inc. We also have a moderate-sized nickel deposit south of Timmins, near Xtrata’s metallurgical facility and Liberty Mines’ nickel mill. Although the price of nickel has decreased substantially over the past year, given the location, infrastructure and positive results from exploration work conducted on this property we believe with the right partner we can realize value on the Langmuir Property. We are looking to monetize this asset to subsidize work on Radio Hill.
In addition to anything mentioned as of yet, we have additional base metal projects in Ontario and Bathurst, New Brunswick.
What are your plans for those assets?
We promised investors we would focus on the iron ore asset and that’s what we’ll do. We’ve spent considerable time and effort growing Rogue’s team with expertise in many related iron ore disciplines, including those who have experience with past-producing iron mines, steel production, financial analysis and local knowledge.
In the meantime, we are looking to add shareholder value by monetizing, or if necessary, joint venturing out our other projects. Our announcement of the formation of Rapier Gold with U.S. Borax Inc., is a good example of how we can add value for our shareholders.
What are the Company’s plans for the next six months?
We recently announced the results of our completed 2012 drill program and are currently conducting metallurgical testing. When this is complete, we will release a NI 43-101 compliant resource estimate and, if positive, we will begin a Preliminary Economic Assessment (PEA), which will allow us to incorporate the cost advantages with the existing infrastructure into the Rogue story. Each of these achievements will allow investors to realize the value within Rogue and its Radio Hill property and potentially bring our valuation in line with our peers.
With the team Rogue has built over the past few years, and with completion of the milestones above, we are well positioned to further define our deposit, progress negotiations with key partners and fast-forward the development process of our property.
Disclosure: Rogue Iron Ore is a Stockhouse client