Magnum Mining (ASX: MGU) jumped 41% today on the back of a couple of announcements. One was with SDM for them to work on the HIsmelt technology at the Buena Vista project. That's good and interesting but it is more akin to hiring a contractor than it is some corporation changing event. The other announcement, the one that really shifted the share price at MGU, was that Mitsubishi is now on board.
The iron (and yes, this is about iron, not steel) industry requires that you be able to actually place your produced material. The entire sector works on large volumes and the logistics of getting it through the production process and out into the hands of eager and willing users. You simply do not want, ever, to have trainloads - or shiploads - waiting for a buyer. It's just not like - say, at the other end of the spectrum - gold where you can stockpile for a bit if you wish. Therefore a part and parcel of an iron production project is to sign up someone to be that placement partner. Who is going to make sure that every piece of production, every cargo, gets sold and sold promptly upon production? That's the aim of bringing Mitsubishi on board.
Magnum Mining share price from ASX
Gaining a sales partner like Mitsubishi is a validation of the strategy. However, perhaps a little too much can be read into this announcement - this is not a binding deal. It's a Memorandum of Understanding - MOU - and the real terms are that we agree we might well do something together now let's sit down and hammer out exactly what we will do and on what terms. Yes, it's an achievement for a small company like Magnum to bring a giant like Mitsubishi to the table. But it's by no means a done deal.
As to the larger background of the project there are merits here, yes. Green iron is going to be a thing, climate change means we'd prefer not to have to use blast furnaces and their associated coke. Magnetite and HIsmelt are indeed one of the ways we can gain green iron. The idea is just fine - it's the details of the implementation which are going to matter though. For the ore is easily available elsewhere, the technology doesn't belong to Magnum either. So, others can do much the same thing if they wish - therefore the determinant of success is not the idea but how well Magnum implements it. The entire project relies upon management efficiency that is.
