Early Movers in Iron Ore

At the outset of the global consolidation of the iron ore industry in mid-2000, and before the rapid increase in consumption driven primarily by China’s growth in imports, Sphere’s Directors established an investment and development strategy of acquiring rights to high quality, large scale iron ore magnetite deposits in Mauritania. Mauritania was targeted given its:

• strong reputation as a reliable source of supply of high quality products into the European steel industry;
• competitive freight to those and other strategic markets;
• established iron ore port and rail infrastructure;
• massive undeveloped provinces of magnetite deposits located close to the railway; and
• welcoming approach to foreign investment in all sectors of the economy and particularly in the resources sector.

In October 2000, Sphere was invited by the Mauritanian Government to review the iron ore operations in Mauritania, and assess joint venture opportunities in the country, in collaboration with the majority state-owned iron ore producer SNIM. Following extensive due diligence undertaken by former Hamersley Iron professionals now working with Sphere, SNIM and Sphere entered into a Joint Venture Agreement (JVA) in October 2001 to assess and develop a series of magnetite deposits situated close to SNIM’s existing railway and operations, with Sphere being appointed as the operator of the joint venture.

The JV was structured to allow staged work on the bankable feasibility study (BFS) on the Guelb el Aouj DR Pellet Project with Sphere to earn 50% in the joint venture area at its completion. Sphere then recruited additional iron ore industry veterans to oversee the work and promoted the project internationally to raise the funding needed for the BFS.

The BFS progressively demonstrated the superior quality of the material, massive scale of the deposits, robust economics of the project and advantages of the existing transport infrastructure. These strengths caught the attention of international fund managers who now make up the majority of Sphere's shareholder base.

The recent changes in the iron ore market and the outstanding BFS results have continued to build the project from strength to strength. Sphere and its partners are now in a position to develop the first 7Mt/a project on Guelb el Aouj, with incremental expansions to follow, given the vast potential of the other deposits in the JV Area and booming market demand.

Sphere has also established a portfolio of large scale, strategically positioned deposits that it owns outright and will be another focus of exploration activity in the immediate future. The work on these deposits will focus on the blast furnace (BF) pellet markets in China, India and Europe, and direct reduction (DR) pellet markets in the Gulf region.