These are stressful times for the global critical minerals space, but it spells good news for investors.
While critical metals, and high-quality pig iron, are essential to the energy transition, access to it has become more and more challenging.
Digging into the details, exports like pig iron have been broadly impacted by the war in Ukraine. Russian and Chinese exports are no longer welcome in many markets, especially the United States. American importers have looked to other areas like Brazil to satisfy this demand in one big worldwide game of musical chairs. This means less product is moving where it needs to go, putting pressure on industries from electric vehicle manufacturing to building construction, all despite very strong market fundamentals.
A home-grown option is exactly what investors are looking for and many need look no further than Strategic Resources Inc. (TSXV:SR), a Montréal, Québec based mineral exploration and development company with assets in two world class mining jurisdictions, Canada and Finland.
The high purity iron and critical minerals company is focused on its flagship BlackRock project, which is a fully permitted and ready to construct mine, concentrator, and metallurgical facility in Québec.
With access to the United States and broader North American markets, the facility is near existing mines, infrastructure, and ports that are already serving the steel value chain. It is a multi-metallic ferroalloy project that is targeting production of pig iron (a critical ingredient for electric arc furnaces), and critical metals titanium and vanadium.
The green steel transition:
These metals are of specific importance as people look to switch the mix in all these blast furnaces as they transition to electric arc furnaces.
The mix for all the steel recipes is changing significantly to reduce GHG emissions, leading to a much higher percentage of scrap steel going into electric arc furnaces to make steel. Because scrap is what is being used, virgin iron units are essential to dilute impurities. This is where high purity products up the steel value chain will get more traction.
This represents most of Strategic Resources’ revenue, roughly split 65 per cent high-purity pig iron, 30 per cent vanadium, 5 per cent titanium. The company’s iron product is ideally suited for high-quality steel, similar to the Rio Tinto’s (NYSE:RIO) operation in Québec. Rio Tinto is the gold standard for high-purity pig iron production and is working in the same jurisdiction as Strategic. Another company in the region is Champion Iron Ltd., who is currently working to upgrade its facility to be able to produce 69 per cent iron, a high purity iron concentrate, which can be aimed at the EAF market with further metalization processes.
The BlackRock project – Québec:
Strategic is working towards providing the highest purity (96 per cent Fe) and greenest metallic iron in the market to be utilized in the decarbonizing efforts of the foundry and steel producers in North America and Europe. The vanadium and titanium ferroalloy and energy metals products will also assist in alleviating the critical minerals and battery metals shortage.
The company will spend the balance of 2023 working to put together a construction financing package for the BlackRock project that would allow for construction on the project to begin in 2024.
Its recent business combination with BlackRock Metals Inc. provided three main assets:
The first asset is its fully permitted metallurgical processing facility, to be constructed at Port Saguenay in Québec (East Coast deep seaport).
The facility will consist of a pelletizing plant that can take the BlackRock mine site vanadium-titanium-magnetite (VTM) concentrate or iron concentrate feed from third party groups, as well as a direct reduced iron furnace, along with open slag bath electric furnace, vanadium converter furnace, conveyor system and wharf access.
38 percent of the detailed engineering has been completed for this facility. Power and natural gas agreements are in place and the project has all the authorizations needed to start construction.
The second is the fully permitted mine and concentrator to be constructed in Chibougamau, Québec. Detailed in a November 2022 feasibility study, the mine site will consist of one open pit with a 39-year mine life and a magnetite concentrator that will produce approximately one million tonnes of VTM concentrate per year. 61 percent of the detailed engineering has already been completed.
The third asset is the past producing Mustavaara project in Finland. Strategic Resources completed a Preliminary Economic Assessment (PEA) on the mine in 2021, which contemplated a smelter and hydrometallurgical plant in Raahe, separate from the mine site and concentrator.
Given the planned metallurgical facility in Québec for the BlackRock project and similarities between both of their concentrate specifications, the company decided to only evaluate a mine site and concentrator operation in Finland, with concentrate eventually expected to be processed at the Québec facility.
As described in the PEA, the proposed project will have 329 kt of annual pig iron and 4.6 kt of annual FeV80 production over a 20-year mine life.
What is it used for?
Vanadium is a key agent in strengthening construction steel. Merchant pig iron is a raw material or semi-finished steel derived from the smelting of iron concentrates. Due to its low phosphorus and manganese content, BlackRock’s pig iron qualifies as a premium merchant pig iron product and can command a premium price from foundries who struggle to find substitutes.
In an interview with Stockhouse Editorial, company director Scott Hicks explained that Strategic Resources could send its vanadium slag product to major processors in the industry in the US, Europe or South Africa, who likely would turn it into ferrovanadium, as 90 per cent of vanadium goes into the steel, but could also process it into electrolyte, which is used for batteries.
Expansion Opportunities:
There is significant potential for the company to expand its capabilities, as its feasibility study proposed the possibility of processing vanadium slag with an off-taker. There is also potential to produce vanadium chemicals at the metallurgical plant at the Port of Saguenay. The team is also considering medium-term growth options around increasing ultimate production rates, including an increase to the mining rate at the mine site and increase throughput at the metallurgical plant. While the second pit was not utilized in the feasibility study (the study only mines one of the two), it could almost double the reserve tonnage. The current pit has a 39-year projected lifespan according to the feasibility study and the other could have around 30 years of mine life using the same mining rate.
Other options on the table include bringing the concentrate over from Finland if the facility were expanded to receive more concentrate.
Next steps:
Investors take note: This is a de-risked opportunity. Almost all of the work has already been done on the BlackRock project. The drilling, studies and permitting are complete, and the next step is now to focus on financing. The team is looking at a fulsome funding package with Orion and Investissement Québec helping to support a large portion of the financing. Strategic is also looking at corporate development moves which may reduce the required raise.
This is just the first in our multi-part series looking at what Strategic Resources Inc. has to offer. Coming soon, future editorial will dive deeper into the BlackRock project, the Québec government’s support, the company’s share structure, and the team leading this business to success.
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