The following is a transcription of the above video, and The Market Online has edited it for clarity.
The critical mineral exploration and development company Strategic Resources (TSXV:SR) continues to focus on its high-purity iron and vanadium projects in Canada and Finland. Looking at its Canadian projects, BlackRock and the Pellet projects, that is our focus today.
Here to talk about the company and the current happenings is the chairman and CEO himself, Sean Cleary. Hello and welcome, Sean.
TMO: Let’s start off with what is the green steel industry since the Pellet project of yours and your iron metallics project will focus on making products for the green steel industry.
Cleary: Well, the steel industry globally, you know steel is a very important material. You can’t have the modern world without the production of steel. However, the steel industry produces almost 10 per cent of global greenhouse gas emissions. So especially within the western world, there’s a big movement to have the industry reduce emissions. This is being influenced by government policy as well as from within the industry.
And so, in very simple terms, the industry is moving away from blast furnace technology towards electric furnaces. And this move will in time reduce greenhouse gas emissions by about 70 per cent. So that’s the goal.
As the industry does that, it’s changing the mix of inputs in order to make steel. So, the industry’s moving away from low-grade, dirty iron ore type materials to recycling steel using metallic iron that’s high purity in the recipe for making steel in electric furnaces. So we’re, as a company, very much focused on this transition and trying to take advantage of our permitting that we have at Port Saguenay in Quebec to produce very high-grade iron pellets for this green steel movement.
TMO: And if we were to talk about the company’s pellet plant, what do you want people to know about the project that may come as a surprise?
Cleary: Well, we will produce very low emission pellets and that are very high purity. So that’s our objective. And we have a strategic advantage in terms of being located at Port Saguenay in Quebec, where we have a long-term lease because that area is supplied by hydroelectric power, and we have access to natural gas.
So compared to other pellet operations in North America, our pellets like on a per pellet basis, our emissions will be much lower. And that’s what the industry is looking for, especially when we think about Europe moving to the carbon border adjustment mechanism, CBAM, the entire industry is looking at the cost of carbon emissions and being able to source cleaner, greener, pure materials is really what it’s all about. And that’s the solution that we’re going to provide with the BlackRock project in Quebec.
TMO: And if we were to look at Port Saguenay, what are some of the advantages of that specific location?
Cleary: Well, geographically we can supply into the Great Lakes as well as out into the Atlantic. As I mentioned, we have a natural gas supply as well as hydroelectric. Emissions per pellet are very low. The region itself is a very populated industrial region of Quebec. It’s the home of Rio Tinto’s Alcan. You have many plants in this region. When we went through permitting on the larger BlackRock project, we didn’t have any objectors to the project at all.
This project also hits a lot of ESG in terms of sustainability as well as social acceptance. And we’re in partnership with the Cree Nation government as well as the other First Nations groups of Innu in the region. And we have impact benefit agreements in place as well as development agreements in place with these different groups plus cooperation agreements with all of the municipalities.
It checks the box in terms of social acceptability, and the returns on the project look very good. We recently put out a press release on our pre-feasibility study showing that the cost of the project would be just under $500 million. Very nice returns in terms of like around 25 per cent after tax IRR on the project, $173 million of EBITDA projected per year. And it’s a project that is well supported by government because the Quebec government through Investissement Quebec owns 41 per cent of our company. And the government has also invested in the port infrastructure.
In December they announced a $110 million conveyor system from the wharf to the industrial park where we have our long-term lease to be able to transport iron concentrate pellet feed from the wharf to the plant and then the pellets back down to the wharf for shipment. Port Saguenay is a federal port. It’s part of Ports Canada and just an excellent management team that knows how to get things done there.
TMO: Well, and that kind of answers my next question. I was going to ask you about the recently released results from the iron pellet plant study, which I believe you just gave me some good results that came out. Is there anything else that you kind of wanted to highlight for that or did we cover everything there with that?
Cleary: Well, I would say that we are in a position where we’re now moving towards securing our pellet feed supply and we’re in discussions with some of the traders in this part of the industry as well as some of the producers of pellet feed and off-takers on the steel side.
We’re working towards either it will be a sort of partnership arrangement or contractual offtake arrangements on that side. And then we’ll be in a position where we can complete our financing. That will come later in the second half of the year.
You know, with the view that if we’re successful in getting all of that done, we could be in a position schedule-wise to start construction in the spring of next year. And then roughly two and a half years later we would be in production and up and running. That’s sort of the overall schedule that came out of the study that we’ve been working on over the last number of months.
TMO: Well, I know the pellet study is being called phase one, so what’s the future growth plans after that?
Cleary: So, once we’re up and running with the 4-million-ton-a-year pellet plant we’ll be producing DR grade pellets. The next phase of the project would be to construct the DRI plant. And we are permitted already at Port Saguenay for that part of the project where we could produce 800,000 tons of DRI per year. So that’s the kind of metallic iron that is used directly for electric furnace steel making.
We could take a portion of our pellet production and just add more value going up the value chain in the iron space to DRI and be a supplier of DRI or HBI to the marketplace. That’s phase two. And that would be a similar type of CapEx (capital expenditure) to what phase one is and would really enhance the overall value of the project as well as revenues and cash flow.
That’s what we call phase two. And then the potential for phase three is to backwards integrate into the open pit mine, which we have permitted a concentrator that’s located near Chibougamau. Then eventually we could have an integrated operation.
TMO: And as we continue into the year, what is something you’d want investors to know, or you’d like to leave them with that they might not already know?
Cleary: Well, our market cap today we’re trading around $50 million. Our symbol is SR on the Toronto Venture Exchange. We’re very well sponsored. Aurion Mine Finance, which is one of the largest private equity funds in the mining and metal space globally owns a significant portion of the company, Investissement Quebec, which represents the Quebec government is also a significant investor, as is the Lumina Group, which is Ross Beaty’s development company based in Vancouver. And they’ve built and developed and sold many mining operations around the world.
They’re very helpful with bench strength in terms of some of the individuals of expertise that is lent to this project. I think I mentioned the Cree Nation is also an investor in the company, so we’re a very well-sponsored company but not that well known of a company.
We’ve been public for about a year, about 12 months ago. We’re looking to grow. We have the potential of also developing our Finland operations for the European market, so we’re looking at different partnerships for that as well.
Lots to come on Strategic Resources going forward.
You can find Strategic Resources Inc. on the TSXV under the symbol “SR” or head to its website at strategic-res.com for more information.
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