Carpentaria Exploration soon to be cashed up ticking the boxes at Hawsons iron project

Carpentaria Exploration (ASX: CAP) has been diligently developing its JV flagship Hawson project in the Broken Hill district of New South Wales carving a maiden magnetite resource of 1.4 billion tonnes.

It also owns 20% equity stake in the Hughenden thermal coal project in Queensland.

Back to Hawsons Iron project, where many boxes have been ticked already including:

- established magnetite resource
- infrastructure
- power
- water
- native title extinguished
- funding

Hawsons is ideally located just 60 kilometres south of Broken Hill in New South Wales, the tenements are only 40 kilometres from a main rail line and have ready access to skilled labour and other infrastructure.

In April 2010, Carpentaria introduced a farm in partner to the Hawson project with unlisted Bonython Metals Group (BMG), with a $81 million deal that was a coup for managing director Nick Sheard as BMG agreed to a staged injection of cash to Carpentaria of $53 million plus $28 million for exploration costs.

BMG agreed to make an inital cash payment of $5 million and a further $8 million to fund exploration and resource definition.  Future staged cash and other payments were agreed of up to $68 million to Carpentaria.

In return, Carpentaria would be cashed up and retain a 20% free carried interest to the targeted production of 20 million tonnes per annum (tpa) iron ore concentrate from Hawsons.

Fast forward to 2011 and the joint venture with BMG will see a next payment to Carpentaria of $25 million due by 15 May 2011.  BMG will fund the Feasibility Study with an estimated cost to it of $20 million to take BMG to 51% of the Hawsons.  If the study is positive, Carpentaria would have cash of $23 million and free carried to the 20mtpa milestone.  BMG would own 80% of Hawsons.

The Pre-feasibility study (PFS) is almost complete to determine the viability of a magnetite operation at Hawsons with an initial target of 5 - 6 million tonnes per annum (mtpa), ramping up to 20 mtpa. This would use conventional mining and processing techniques to produce a high grade concentrate shipping out of South Australia using existing infrastructure initially - transport and port for production up 5-6mtpa.

Then it is on to the Bankable Feasibility Study.

With the development of Hawsons and a new magnetite iron region near Broken Hill would bring considerable potential economic benefits for the region as well as to South Australia from new jobs and services and potential new infrastructure built.

In terms of the resource upside, Hawsons has it in spades.  From a current inferred iron resource of 1.4 billion tonnes at Davis tube Recovered Grade of 15.5% for 220 million tonnes of contained iron to an exploration target of 6-11 billion tonnes at 14-17% magnetite DTR with a concentrate grade of 69 -71% Fe. 

Significantly, this comes with a relatively low level of impurities, to a depth of 250 metres over an estimated strike length of 34 to 51 kilometres.

This is considered to be one of the largest magnetite exploration targets in Australia. Importantly the magnetite occurs in a siltstone and is very soft, enabling low cost mining and crushing.

Impressively, Hawsons looks to be a low cost operation, with low power requirements, a truck and shovel mining reducing costs and low strip ratios.

However, Carpentaria is not a "one trick pony". It has the equity in the Hughendeon coal project as well as other projects at varying stages of exploration including:

- Hematite / magnetite target at McDougalls / Torrowangie
- Continue tin exploration at Euriowie / Yanco Glen / Apollyon
- Define additional tungsten resources at Yanco Glen
- Drill nickel targets at Koonenberry when granted
- Drill Glen Isla gold early May
- Drill Mother Shipton Gold when gain access

In all, Nick Sheard has added significant value to Carpentaria and de-risked the company via the farm-in agreement negotiated with BMG over Hawsons. It is a big project and these require large amounts of capital.  The next 6-12 months looks to offer Carpentaria investors significant news flow and opportunities with the share price resting under the $0.60 level.