Declaration:
I am a shareholder of Cyclone Metals Limited, and this review has not been endorsed by the company, nor has it been sponsored by any other party in any form (cash, shares, or options).
The information provided in this blog is for informational purposes only and reflects my personal views and analysis. It is not intended to promote the company or create speculation. Readers should conduct their own research and seek professional advice before making any investment decisions.
The Cyclone Metals Limited (ASX:CLE) story is one that immediately resonated with me the first time I was shown the playbook. I recognised the value of the Iron Bear project and had no problem putting some hard-earned cash into the company.
The project lies in the province of Quebec and is one project that is not easily recognised by the average investor unless you have come across Champion Iron Limited (ASX:CIA).
Cyclone Metals operates in the magnetite industry, and its recent surge in popularity is still regarded as a temporary trend without long-term prospects. It's understandable to believe that iron ore revolves around DSO and that haematite is the sole iron-rich mineral worth knowing.
My thoughts are that when you look at Figure 1, the Cyclone Metals Limited price, compare it to Fenix Resources Limited (ASX:FEX) and Champion Iron Limited (ASX:CIA), and then wonder if this could be like investing in Fortescue Limited (ASX:FMG) or Woodside Energy Limited (ASX:WPL) in those early days.
Figure 1: Cyclone Metals Limited share price chart as of 27th February 2025. (source: commsec)
Magnetite has never been a sexy product in Australia, as the Pilbara Iron Ore Dream is all about haematite and the greater than 62% Fe content. Magnetite was frowned upon until the Chinese Enterprise arrived on our shores in 2005/2006 and created a frenzy of iron projects and the famous MOU announcements that seem to trigger alarming share price gains.
However, the festivities did not last and promptly ended in 2009. Those companies that got hooked onto that magnetite festival spent the next decade trying to "make it work," exited, or divested to entities that seem to have the holding power. The iron ore rush of the mid-2000s created some promising mid-cap companies inspired to be iron ore producers, but history shows that the only real sole survivor was Fortescue Limited (ASX:FMG).
The sole Chinese producer left was a company that could not fail, Citic Pacific Mining, which has built a large operation, the Sino Iron Project, an hour south of Karratha, Western Australia. The concept of upgrading the magnetite ore that typically has a low iron content to a grade in the plus 60% range was new to Australia, but as I have learnt over the years, that is what the rest of the world has been doing.
Raw magnetite iron ore has a low iron content, but once it’s processed into a concentrate using beneficiation, it’s a high quality (65% Fe) product with low impurity levels – an ideal material for making steel pellets, which is the preferred feed in steelmaking.
- Citic Pacific
I remember being at the beginning of that project in 2007, thinking these guys are out of their minds. I witnessed an operation going from living in tents, old doggers with no ensuite, to the luxury of everyone having ensuites in the space of 9 months. We were told that this was going to be the biggest operation in Australia at AUD $2B. I think within 12 months of my departure from that project, I heard it had gone magnitudes over that number.
As I mentioned previously, the Cyclone Metals story is not obvious as a value-adding process if you have not come across Champion Iron Limited or if you have not understood the value of upgrading magnetite ore. I still have people mentioning that the process will not work, but let's see if his review could change a few mindsets.
For those who want to skip to the parts of the review, please use the list below.
1.0 Understanding Magnetite
Magnetite, as an iron-rich mineral, actually contains more iron than the hematite mineral. However, while hematite ore typically has high concentrations of hematite, magnetite ore usually contains low concentrations of magnetite. Therefore, this type of iron ore must be concentrated before being used to produce steel. The magnetic properties of magnetite ore are advantageous during this process.
Although magnetite ore may require more processing, products made from it are generally of higher quality than those made from hematite ore. This is because magnetite ore has fewer impurities than hematite ore; thus, the higher cost of processing magnetite ore can be offset.
Australians only understand haematite as an iron ore mineral, but what is relatively unknown is that the Northern American iron ore is mainly magnetite. The Chinese use magnetite, and as they are the conglomerate of steelmaking, that speaks volumes.
Magnetite ore is the main iron ore mined in the United States, Canada, and other iron-rich regions worldwide. In the US, major mining sites include the Mesabi Range in Minnesota and the Marquette Range in Michigan. These areas are part of the broader Iron Range, known for significant iron ore deposits.
In Canada, the majority of magnetite mining takes place in what is known as the Labrador Trough, which is particularly iron-rich and is where mining companies focus on exploration and development. Cleveland-Cliffs is a key player in the magnetite mining industry, operating five iron ore sites, including the Hibbing Taconite joint venture in Minnesota’s Mesabi Range, which produces approximately 8 million metric tonnes of magnetite ore annually. The company is also North America's largest iron ore pellet producer.
2.0 The Iron Ore Market
As many will know, iron is the staple of civilisation, and Figure 2 gives a schematic view of the major areas where notable iron ore deposits are discovered. One of the obvious messages from Figure 1 is that the central market for iron has been in China; Australia has the shortest distance to market; however, the rebuilding of the US is literally next door. Interestingly, the recent tariffs have not mentioned iron ore, and the steel-making machines in the US need cost-effective iron ore.
![Figure 2: Worldwide distribution of iron ore deposits. (source: [1]) | Samso Insights](https://static.wixstatic.com/media/8d6c37_f50150b2ac444231a127938ceff4a31a~mv2.jpg/v1/fill/w_708,h_486,al_c,q_80,enc_avif,quality_auto/8d6c37_f50150b2ac444231a127938ceff4a31a~mv2.jpg)
Figure 2: Worldwide distribution of iron ore deposits. (source: [1])
There is a reason why the Chinese State-Owned Enterprises (SOE) came flooding into Australia like they did in the mid-2000s, and that is the distance to market. The Pilbara is flooded with iron from haematite (30% plus to 62% plus) to even more magnetite. There are multiple billions of iron-bearing geology in the region, and that is still going to be the mecca for iron ore, for now.
The old business had been all about mining haematite (Figure 3), but as we are all learning with the green energy revolution, the green iron phenomenon is just being played out.
Figure 3: Mining haematite as iron ore.
This is not saying that the haematite iron ore business is going to be bearish. Like crude oil, the call for a ban on procuring oil is as ludicrous as the thought that the mining of iron-ore oxides is losing market share. This will never happen as long as you are supplying the higher end of the market.
The big story will be how much disruption the Simandou Iron Ore mine (Figure 4) will do to existing higher-grade projects and how it will severely reduce the economics of the lower-grade companies.
Figure 4: The Simandou Iron Ore project in Guinea. (source: GMK Centre)
The magnetite business is not DSO, but it's all about producing the pellets (Figure 5), which are then shipped to the end user. The haematite game is a Direct Shipping Ore process and involves no processing.
Figure 5: Magnetite products. The top left is from the Sino Iron Ore project in Western Australia. The top right and bottom are products from the Cyclone Metals Limited Iron Bear project in Canada. (source: Sino Iron Ore Project and Cyclone Metals Limited)
There are other magnetite deposits that have very high grades in the 60% and 70%, but they tend to be in smaller volumes, commonly in less than 5M tonnes. These types of magnetite ores are rare to non-existent in the billions of tonnes, so this is why currently, the Banded Iron Formation type of magnetite ores is sought after by miners.
As the iron ore price trend is in the current range (Figure 6), those who have low costs, like the Pilbara major players who are ranging in USD $25/T, will continue to make money. Those that are selling the magnetite pellets in the range of > 60%, like Champion Iron and potentially Cyclone Metals, will make even more as they are selling "Green Iron," which is potentially selling with a USD $60 to $90 premium to the base price, so I am told.
Unlike the oxide ores, the sulphide ores that yield magnetite are a chemical process. The easier you upgrade, the more cost-effective your process is, and the higher grade you are able to achieve. Cyclone potentially fits that bill, as the company tells us, so with fingers crossed, let's hope that is consistent.
Figure 6: The iron ore pricing for iron ore with a 62% iron content. (source: tradingeconomics.com)
With the market currently expecting increased Chinese demand in 2025, this seems like an ideal time for Cyclone Metals to capitalize on its unique asset. In January, the Chinese government issued CNY 693 billion in new government bonds, more than double the amount from the previous year, indicating that officials are beginning to act on earlier promises to stimulate the country's slowing economy.
According to Trading Economics, there is increased optimism that the housing crisis bottomed out last year. Local authorities have reportedly begun purchasing property from major distressed developers, signalling a willingness to support the sector, which is one of the world's largest steel consumers. Meanwhile, major iron ore producer BHP noted that signs of economic recovery in China and rate cuts by global central banks this year are expected to boost demand for precious metals.
3.0 The Labrador Trough—Canadian Iron Ore District
Iron ore in Canada comes from four provinces: Quebec, Newfoundland, Labrador, and Nunavut. The major source of iron ore is found in the Labrador Trough, which is bordered by Quebec, Newfoundland, and Labrador (Figure 7).
Figure 7: This graph illustrates Canada’s iron ore production by province and territory in 2023. Quebec led with 33.6 million tonnes, representing 57% of the total production. Newfoundland and Labrador followed with 20.2 million tonnes, accounting for 34%, while Nunavut contributed 5.6 million tonnes, making up 9% of the national production. (source: Natural Resources Canada).
The Labrador Trough is located in north-eastern Quebec and western Labrador, Canada (Figure 8). It extends in a sinuous southerly direction for 1100 km from Ungava Bay to within 300 km of the St. Lawrence River.
![Figure 8: Labrador Trough, showing major iron deposits in Quebec and Labrador. (source [1]) | Samso Insights](https://static.wixstatic.com/media/8d6c37_d71a4aa54cb443a4bd0d1bbce42c4b6c~mv2.jpeg/v1/fill/w_802,h_793,al_c,q_85,enc_avif,quality_auto/8d6c37_d71a4aa54cb443a4bd0d1bbce42c4b6c~mv2.jpeg)
Figure 8: Labrador Trough, showing major iron deposits in Quebec and Labrador. (source [1])
The term Labrador Trough is used to describe an extensive geosyncline of Proterozoic rocks that traverses the Quebec-Labrador Peninsula for 1100 km. This belt is about 100 km wide in the central part and narrows considerably to the north and south.
The Labrador Trough contains three main types of iron deposits: [1]
Soft iron ores are formed by supergene leaching and enrichment of the weakly metamorphosed cherty iron formation; they are composed mainly of friable fine-grained secondary iron oxides (hematite, goethite, limonite).
Taconites, the fine-grained, weakly metamorphosed iron formations with above-average magnetite content, which are also commonly called magnetite iron formations.
More intensely metamorphosed, coarser-grained iron formations, termed metataconites by G.A. Gross (1968), contain specular hematite and subordinate amounts of magnetite as the dominant iron minerals.
4.0 The Cyclone Metals Limited Story—Iron Bear Project
Cyclone Metals Limited's business may seem complicated when considering the technical aspects like the science of upgrading and achieving the proposed high grade. However, the overall business narrative is quite straightforward.
The most important part of the Cyclone story is that it is an investment in the last part of a project. The ability to proceed to the production and processing stage has been made simpler with the completion of the binding MOU with VALE, which was released on the ASX (Cyclone Metals and Vale execute Development Agreement for the Iron Bear Project), spelling out all the missing pieces of the project, which are the funding and the potential exit for shareholders.
For a company that currently has a market capitalisation of less than AUD $80M (as of 27th February 2025), this agreement sets it up for a pretty comfortable ride to production. The iron ore price (Figure 5) is probably either going to stay in the current range or move higher. The demand from China will have to kick in soon, as they need to stimulate the economy, and the consensus from market commentary seems to agree, at this stage. If this happens, we will be assured that the iron ore price will be potentially higher.
Simplistically put, Cyclone has a resource of 16.6 billion tonnes @ 29.3% Fe% (inferred and indicated JORC 2012 compliant—ASX Release—(Significant Mineral Resource Upgrade for Project Iron Bear) and 18.2% magnetic Fe, with a cut-off grade of 12.5% magnetic Fe.
I will not pretend to know the science, but from afar, I feel comfortable that the guys that know have pretty much scrutinised the numbers and are ok with it.
For me, the Indicated Mineral Resource of 2.15 billion tonnes containing 28.68% total Fe and 19% magnetic Fe is the first important message. The metallurgical report indicating favourable upgrading parameters and grinding of the magnetite will be the key to the rest of the business.
The metallurgical points from the ASX release are listed below:
Production of a Direct Reduction grade concentrate grading 70.6% Fe and 1.2% SiO₂ with an overall magnetic Fe yield of 88.9%²
Production of a Blast Furnace grade concentrate grading 68.9% and 3.4% silica with a magnetic Fe yield of 95.5%
Very low deleterious elements (P, MnO, etc.)
Favourable grindability indices of BWi = 16.7 kWh/t and SMC = 11.7 kWh/t
The other key interest is the infrastructure issues that seem to be also checked off in the ASX release. It is good to remember that there has been a history of iron mining in the area; therefore, Cyclone is not pioneering a new mining region. There is a decent-sized rail line in place, and in a world of iron ore, this is critical.
I fully understand the significance of infrastructure, which is why Tier 1 jurisdictions are crucial when evaluating mining projects. Canada, similar to Australia, is a top-tier location for investing heavily in such projects, as the government relies on mining to create national wealth.
5.0 Samso Concluding Thoughts
There is an old saying, "Once bitten, twice shy," which is commonly said but sparingly applied in the real world. This is why history frequently repeats itself, and we all make the same mistakes over and over again. For me, that was not realising that the Champion Iron bandwagon still had a lot of legs left in February 2019 and missing out on Fenix Resources Limited (ASX:FEX) at the beginning of that year. When the Iron Bear project came across me, I was all over it.
Looking at the business plan for Cyclone, I cannot help but feel that there may be similarities to that of Champion Iron. Looking at the share price chart for Champion (Figure 9), I am hoping that Cyclone will bear some similarities, one would hope. A third of Champion's market capitalisation would be a good prize for most shareholders of Cyclone at this stage (Figure 9).
However, as we all know that the market has a habit of doing its own things, one should tread water carefully, and the best option is to take a long-term view. If you take note of Figure 9, it is good to know that the first significant jump in share price was in 2017, so that was 8 years to date.
Figure 9: The Champion Iron Limited share price chart as of 25th February 2025. (source: commsec)
The Fenix Resources Limited lesson was that I thought the resource was too small, and I could not see how they would be able to monetise the project so far inland with no rail. Well, that was another misconception derived from not understanding the business. The extremely high grade of the product made it commercial. The lesson from that is the high-grade nature of Cyclone is the key.
The 72% and even the 68% products that Cyclone is promoting as an end product will put them in premium pricing territory. Another saying in our mining game is Grade is King, and that Cyclone has that grade.
For me, the strongest endorsement is the binding MOU. Companies like VALE would not invest significant time during the due diligence phase, sign a non-binding MOU, and then finalize it by making it binding only to walk away afterwards.
Additionally, it’s unlikely that a major company like VALE would go through all that effort without signing a binding agreement, only to overlook straightforward issues such as ore upgrade potential, missing infrastructure, technical problems that could threaten the project, or jurisdictional complexities.
Vale, formerly Companhia Vale do Rio Doce, is a Brazilian multinational corporation engaged in metals and mining and one of the largest logistics operators in Brazil. Vale is the largest producer of iron ore and nickel in the world.
What Could Go Wrong?
Iron ore pricing is a key factor that could render Cyclone Metals insignificant. This possibility always exists, and market dynamics are inherently unpredictable. While the fluctuating price remains a concern, the market is currently stable, and with major economies needing to stimulate growth, the outlook for iron ore is not unfavorable.
Technical shortcomings in the development of ore processing and upgrading present another possible obstacle. I believe that if there were going to be a problem, the business wouldn't have progressed to this point. Although this is a significant challenge that could cause any business to fail, I think companies like VALE would have identified it. It's also important to note that upgrading magnetite is not a new process. In fact, upgrading magnetite ore is likely the simplest aspect of Cyclone Metals' operations.
The next potential issue could be an internal collapse in management, but given the high stakes, I believe it would be addressed swiftly. Paul Berend and Paul Vermeulen are crucial for success, as their experience will propel operations. Other technical and financial staff will be relatively easier to find. The market's view of their performance will be vital for the business's future, influencing overall market confidence in the company.
The agreements with the First Nations community will be the next hurdle. From what I have gathered from publicly released information, this seems to be managed. Infrastructure looks ok from what I have researched.
The Trump Tariffs are currently creating market turbulence, but I do think that the viability of the business has been shown to be more about the long term than any short term market fluctuations. How the dust settles with the specifics of the tariffs may not even affect iron ore coming from Canada.
Like all projects, the access to funding is always the cloud hanging over every business. However, it does appear that the VALE agreement has addressed this part of the business.
I believe the challenges facing Cyclone Metals will primarily stem from three areas: a decline in iron ore prices, a conflict with First Nations, and insufficient funding. Based on the news release, there are valid reasons to believe that these issues are currently being addressed.
Retail is Not Driving This Narrative
Some recent news published in the Sydney Morning Herald - Billionaires bullish on magnetite as new hematite discoveries slow - makes for a good read. A series of magnetite projects are making their run into being upgraded to the numbers mentioned by Cyclone Metals Limited.
The introduction of magnetite to feed the Green Iron narrative is no longer being played out in conversations. The moves are well entrenched and remind me of the recent lithium rush. The article talks about the likes of Andrew Forrest and Gina Reinhart making big moves to have a share of the pie.
The asset accumulation has already started, and those who are looking to take that ride may have been left standing on the jetty. Reading through the article, it may appear that the good projects have left the port.
If anyone questions whether the entire Green Iron initiative is a marketing strategy, in October 2024, a consortium called Green Iron SA was established, consisting of Magnetite Mines, Flinders Ports, Aurizon, and GHD. This group intends to create a magnetite mining operation in the Braemar region of South Australia, with plans to produce export-quality pellets and build a direct reduced iron plant at Port Pirie.
The recent bailout of the Gupta-controlled steelworks in Whyalla, South Australia, by the government is another endorsement of establishing a serious green iron ore-steel-making region (Figure 10).
Figure 10: GFG Alliance’s mining arm, SIMEC Mining has produced its first high quality GREENSTEEL pellets that will underpin the future of decarbonised steel production in Whyalla, South Australia.
This effort aims to establish South Australia as a leading supplier of green iron to Asian markets, utilizing the state's abundant magnetite resources and renewable energy.
When you take all those components into consideration, one would have to conclude that this is worth some DYOR yourself and consideration with your financial advisors.
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Reference:
Swain, Sagar Kumar, Mishra, Devi Prasad, 2020 Global trends in reserves, production, and utilization of iron ore and its sustainability with special emphasis to India, Vol 68, June, pp11-18
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