* New iron ore prospects emerge in Australia
* Aims are to rival Rio Tinto, BHP mines, feed China
* Small miners join forces
* Stocks of small miners up by average 53 pct in year to March 31
By Bruce Hextall and James Regan
SYDNEY, June 9 (Reuters) - Australian prospectors are scouring remote outback locations for new sources of iron ore to rival the big western lodes dominated by Rio Tinto and BHP Billiton , spurred on by China's swelling appetite.
Analysts expect most of Australia's iron ore to keep coming from Western Australia's Pilbara region, the world's single largest deposit, which is seen producing about 400 million tonnes this year.
But new entrants are reworking old geological maps, lobbying for more ports and exploring new ground hundreds or thousands of kilometres from the Pilbara.
Despite some inroads, BHP Billiton and Rio Tinto have shown an unwillingness to share rail haulage lines and ports they spent hundreds of millions of dollars developing over the past four decades, leaving many known deposits in the Pilbara stranded and worthless.
At the same time, Chinese willingness to help fund work on new projects is overcoming past obstacles to development far from the established mining camps.
Chinese steel production continues to grow, with estimates approaching 680-700 million tonnes in 2011, UBS said, from 627 million tones produced in 2010.
"It's in the interest of the Chinese for these new provinces (deposits) to crop up, though not necessarily in the interest of BHP and Rio Tinto," said Pieter Bruinstroop, a mining analyst for Intersuisse in Melbourne.
"If you look at what happened in the 1960s and '70s when the Japanese were investors in raw materials in Australia to get them up and going, you can see the similarities," Bruinstroop said.
Japanese industrials played an integral part in funding early iron ore and coal mine projects in Australia in the decades following World War II, frequently providing capital in exchange for supply guarantees or equity stakes.
One of the largest investments of this kind, the BHP Billiton-Mitsubishi Alliance in coal mining, is still intact.
Iron ore .IO62-CNI=SI sells for about $170 a tonne and hit record high prices of around $190 a tonne in February, well above the average cost of production for miners.
According to Resource Capital Research, a basket of 59 Australia-listed junior iron ore mining companies, with a combined market capitalisation of A$37.9 billion, rose on average by 53 percent over the 12 months to March 31, 2011 versus a 3.3 percent decline in the S&P/ASx 200 index of leading Australian companies .
A consortium of small-capped firms along with Chinese steel giant, SinoSteel, are tying up ground in eastern Australia's New South Wales state with the aim of opening a new iron deposit.
It is a big task but not impossible, according to Andrew Woskett, the spokesman for a group of companies seeking to develop the region as a fresh supplier of iron ore.
The alliance comprises Australian-listed Carpentaria Exploration , Havilah Resources , Minotaur Exploration , Royal Resources and U3O8 and private companies Sinosteel, Bonython Metals Group and Wentworth Metal Group.
Each company hopes to identify iron ore deposits within the Braemar iron formation that stretches from Broken Hill, the outback mining town where BHP has its roots, for 250 km into South Australia state. The southern edge of the deposit is only around 150 km from the coast.
Woskett said there was potential throughout the Braemar Iron Formation for 20 to 40 billion tonnes of mineable deposits containing magnetite, a primary form of iron ore.
"There's great potential as the furthest deposits are only 400 kilometres (250 miles) from the coast and the rail is currently underutilised," said Woskett.
"There's already the capacity to pump 10 million tonnes down the railway but ultimately there is an opportunity to increase that," he said.
Some A$17 billion has been earmarked in Western Australia and A$24 billion nationally to build new ports to handle the projected growth in exports.
"It will happen if the Chinese want it to happen," said Bruinstroop. "If the major consuming steel producers want to participate in these projects, they will get developed."
In South Australia state, WPG is gearing up to mine ore suitable for immediate shipping from its Peculiar Knob project under development.
U.S.-based Genesee & Wyoming has signed a five-year rail haulage agreement with WPG to transport 3.3 million tonnes of ore a year, expected to start in the second quarter of 2012.
Nearby, IronClad Mining is preparing to export ore from its Wilcherry Hill mine at an initial rate of 4 million tonnes a year starting in 2012. The project is an 80-20 percent joint venture between IronClad and Trafford Resources .
Further west, Murchison Metals expects to export iron ore from the fledgling midwest region in late 2014 or early 2015.
Murchison and Mitsubishi Corp are equal joint venture partners in Oakajee Port & Rail project, which is developing a deep water port 1,000 km south of the Pilbara to initially ship 45 million tonnes of iron annually.
The Western Australian state government has already agreed to extend a funding deadline to facilitate the project.
The two companies also are partners in Crosslands Resources Ltd, which is mining iron ore at the nearby Jack Hills deposit.
The new deep water port is being designed to include an extensive rail component to link the region's remote and scattered iron ore deposits to the Indian Ocean. It is expected to cost more than A$3 billion to construct and would be available for commercial shipping in 2014.
The new port would handle iron ore from the mid-west province under development about 1,200 km south of the Pilbara.
Gindalbie Metals is counting on the port being built to maximise production from its Karara mine to around 30 million tonnes a year by 2020 in partnership with Angang Steel Co of China.
"Work on the Karara Project is moving very rapidly with approximately 1,300 people working on the construction of the processing plant, mining operations and all of the supporting infrastructure such as the rail spur, high voltage power line, water pipeline and port," Gindalbie Managing Director Tim Netscher said
China's Sinosteel Midwest also has signed up to use the port.
Rail operator QR National is spending A$200 million on new locomotives and equipment to haul Gindalbie's iron ore.
Worldwide, there is potential for an additional 500 million tonnes of new iron ore supply over the next five years, UBS said in a client note on Wednesday, compared to 2.1 billion tonnes of global production in 2010. (Editing by Ed Davies and Michael Urquhart, sourced Thomson Reuters)
Analysts expect most of Australia's iron ore to keep coming from Western Australia's Pilbara region, the world's single largest deposit, which is seen producing about 400 million tonnes this year.
But new entrants are reworking old geological maps, lobbying for more ports and exploring new ground hundreds or thousands of kilometres from the Pilbara.
Despite some inroads, BHP Billiton and Rio Tinto have shown an unwillingness to share rail haulage lines and ports they spent hundreds of millions of dollars developing over the past four decades, leaving many known deposits in the Pilbara stranded and worthless.
At the same time, Chinese willingness to help fund work on new projects is overcoming past obstacles to development far from the established mining camps.
Chinese steel production continues to grow, with estimates approaching 680-700 million tonnes in 2011, UBS said, from 627 million tones produced in 2010.
"It's in the interest of the Chinese for these new provinces (deposits) to crop up, though not necessarily in the interest of BHP and Rio Tinto," said Pieter Bruinstroop, a mining analyst for Intersuisse in Melbourne.
"If you look at what happened in the 1960s and '70s when the Japanese were investors in raw materials in Australia to get them up and going, you can see the similarities," Bruinstroop said.
Japanese industrials played an integral part in funding early iron ore and coal mine projects in Australia in the decades following World War II, frequently providing capital in exchange for supply guarantees or equity stakes.
One of the largest investments of this kind, the BHP Billiton-Mitsubishi Alliance in coal mining, is still intact.
Iron ore .IO62-CNI=SI sells for about $170 a tonne and hit record high prices of around $190 a tonne in February, well above the average cost of production for miners.
According to Resource Capital Research, a basket of 59 Australia-listed junior iron ore mining companies, with a combined market capitalisation of A$37.9 billion, rose on average by 53 percent over the 12 months to March 31, 2011 versus a 3.3 percent decline in the S&P/ASx 200 index of leading Australian companies .
A consortium of small-capped firms along with Chinese steel giant, SinoSteel, are tying up ground in eastern Australia's New South Wales state with the aim of opening a new iron deposit.
It is a big task but not impossible, according to Andrew Woskett, the spokesman for a group of companies seeking to develop the region as a fresh supplier of iron ore.
The alliance comprises Australian-listed Carpentaria Exploration , Havilah Resources , Minotaur Exploration , Royal Resources and U3O8 and private companies Sinosteel, Bonython Metals Group and Wentworth Metal Group.
Each company hopes to identify iron ore deposits within the Braemar iron formation that stretches from Broken Hill, the outback mining town where BHP has its roots, for 250 km into South Australia state. The southern edge of the deposit is only around 150 km from the coast.
Woskett said there was potential throughout the Braemar Iron Formation for 20 to 40 billion tonnes of mineable deposits containing magnetite, a primary form of iron ore.
"There's great potential as the furthest deposits are only 400 kilometres (250 miles) from the coast and the rail is currently underutilised," said Woskett.
"There's already the capacity to pump 10 million tonnes down the railway but ultimately there is an opportunity to increase that," he said.
Some A$17 billion has been earmarked in Western Australia and A$24 billion nationally to build new ports to handle the projected growth in exports.
"It will happen if the Chinese want it to happen," said Bruinstroop. "If the major consuming steel producers want to participate in these projects, they will get developed."
In South Australia state, WPG is gearing up to mine ore suitable for immediate shipping from its Peculiar Knob project under development.
U.S.-based Genesee & Wyoming has signed a five-year rail haulage agreement with WPG to transport 3.3 million tonnes of ore a year, expected to start in the second quarter of 2012.
Nearby, IronClad Mining is preparing to export ore from its Wilcherry Hill mine at an initial rate of 4 million tonnes a year starting in 2012. The project is an 80-20 percent joint venture between IronClad and Trafford Resources .
Further west, Murchison Metals expects to export iron ore from the fledgling midwest region in late 2014 or early 2015.
Murchison and Mitsubishi Corp are equal joint venture partners in Oakajee Port & Rail project, which is developing a deep water port 1,000 km south of the Pilbara to initially ship 45 million tonnes of iron annually.
The Western Australian state government has already agreed to extend a funding deadline to facilitate the project.
The two companies also are partners in Crosslands Resources Ltd, which is mining iron ore at the nearby Jack Hills deposit.
The new deep water port is being designed to include an extensive rail component to link the region's remote and scattered iron ore deposits to the Indian Ocean. It is expected to cost more than A$3 billion to construct and would be available for commercial shipping in 2014.
The new port would handle iron ore from the mid-west province under development about 1,200 km south of the Pilbara.
Gindalbie Metals is counting on the port being built to maximise production from its Karara mine to around 30 million tonnes a year by 2020 in partnership with Angang Steel Co of China.
"Work on the Karara Project is moving very rapidly with approximately 1,300 people working on the construction of the processing plant, mining operations and all of the supporting infrastructure such as the rail spur, high voltage power line, water pipeline and port," Gindalbie Managing Director Tim Netscher said
China's Sinosteel Midwest also has signed up to use the port.
Rail operator QR National is spending A$200 million on new locomotives and equipment to haul Gindalbie's iron ore.
Worldwide, there is potential for an additional 500 million tonnes of new iron ore supply over the next five years, UBS said in a client note on Wednesday, compared to 2.1 billion tonnes of global production in 2010. (Editing by Ed Davies and Michael Urquhart, sourced Thomson Reuters)
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