At first glance, ASX-listed Cyclone Metals appears to have a Herculean task ahead.

The Perth-based company's world-class 16.6 billion tonne Iron Bear iron ore resource in Canada requires capex in the billions and is aiming to break into the Direct Reduction (DR) pellet market – central to green steel production and dominated by a handful of majors.

However, since acquiring the project last year, the small but mighty Cyclone team is using its wealth of iron ore and steel industry experience to rapidly advance Iron Bear towards a joint venture to get the Tier 1 asset into production.

When Cyclone acquired Labrador Iron and its project previously known as Block 103 about 18 months ago, it was already considered one of the world's largest undeveloped magnetite deposits with an historical 7.2Bt resource.

More than US$35 million had already been spent on the project, including a positive 2013 preliminary economic assessment and a 2020 update.

Since then, Cyclone has consolidated historical and modern geophysical data, used a magnetic inversion model to update the resource to 16.6Bt at 29.2% iron, and commissioned an industrial pilot plant to demonstrate Iron Bear can produce higher quality magnetite products at a higher yield than previously considered.

Cyclone is now attracting industry interest after demonstrating Iron Bear project can produce three different high-quality, low-impurity concentrates – plus DR pellets.

Pilot test work produced DR-grade concentrate grading 71.3% iron and 1.1% silica – considered a very clean DR concentrate on the seaborne market.

It also produced a Blast Furnace (BF) concentrate grading 69.8% and 3.4% silica, with an impressive magnetic iron yield of 97.6%.

A third potential product was generated, a Reverse Flotation concentrate grading 68.3% iron and 4% silica, increasing the overall recovery.

The DR pellets, with four different chemistries, were being tested at the time of going to print, to achieve optimum metallisation and physical properties for low carbon steel production.

DR pellets currently command a price premium about US$50/t above the 65% iron index.

Why would a major pay attention?

CEO Paul Berend said there were two key reasons a major would be interested in a joint venture at Iron Bear project.

"The major's reserves are decreasing rapidly in terms of iron ore," he said.

 "And this is a very large deposit which moves the needle.

"You can conceivably produce 150 million tonnes per annum out of this deposit alone for 30 years.

"Reason number two is the fact that it's ultra-low carbon and low cost because of access to hydropower and the very low stripping ratio of the deposit.

"So it's got some very unique characteristics, which are very rare, and why we can produce super high grade, super clean ores."

DR pellets are used in direct reduction steel production, where furnaces use natural gas or hydrogen as a reductant, instead of the coal used in traditional blast furnaces.

Iron ore producers including Brazil's Vale and London-listed Anglo American have forecast growing demand for DR product as steelmakers move to cut emissions.

Factors fuelling demand include the European Union's carbon tax, the Carbon Border Adjustment Mechanism, which is set to come into full effect in 2026.

"The less fuel you use to make steel, the better," Berend said.

"The supply of DR pellets is constrained.

"These things are gold, because they enable the guys in the Middle East to produce low carbon steel."

Iron Bear's features

The Iron Bear project spans 7,275ha in Labrador and Newfoundland, in the iron ore-rich Labrador Trough which hosts operations owned by Tata Steel, Champion Iron and Rio Tinto's Iron Ore Company of Canada.

Berend said the project's scale, location and access to infrastructure, including green energy, were standout features.

Iron Bear project sits less than 25km from an open access heavy haulage railway, which leads to the open access Pointe Noir Port and its iron ore export terminals.

Low-cost power hydropower is available from Menihek, 70km from Iron Bear project, connected by two 69kV power lines with expansion capacity.

Cyclone has also designed Iron Bear project as a "dry tailings" operation.

Berend said this had prompted much discussion but was based on good science and was designed to mitigate any impact on the local aquifers.

"We're going to try and do the right thing," he said.

"We still want brown bears to be running about."

A 2013 preliminary economic assessment demonstrated positive economic outcomes but had not considered using the available hydropower and Cyclone believes there is significant upside, which it aims to demonstrate in further studies.

Further potential

The company has a clear strategy in place to deliver the best outcomes possible for the large-scale project.

Cyclone has positioned itself to start offtake negotiations in the coming months for both concentrates and pellets, and to strike a joint venture deal with a major to enable a decision to mine within four years.

"I believe it's my duty, to ensure that this is done properly," Berend said.

"Excellence is not something optional when you're playing with people's hard-earned money.

"Everything we do has impacts, maybe on a small amount of people, but they're very meaningful and important … so we have no choice but to at least give them excellence and our utmost commitment, to give them the best version of ourselves that we can."

Iron ore expertise

Cyclone has built a powerful team with vast iron ore and steel industry experience, deal-making prowess and a strong focus on corporate governance.

"Steel making is in my blood," Berend said.

He was earlier general manager business development for Rio Tinto's iron ore division, GM corporate strategy for steel major ArcelorMittal and has worked at consultancies including McKinsey and Company, Partners in Performance and PWC on a variety of projects in the resources sector.

Prior to Cyclone, he managed the advisory practice of Hatch for the Asia Pacific, developing innovative competitive advantage for blue-chip mining clients. 

He speaks fluent French, has worked extensively with private equity to develop early-stage mining projects and has turned around underperforming mining assets.

He also was quick to credit metallurgical engineer and Cyclone's general manager technology and steel markets Paul Vermuelen, who took one look at Iron Bear's orebody and realised it could produce in-demand DR pellets.

The leadership team is rounded out with corporate advisory, legal and finance expertise.

Looking ahead

Cyclone is preparing for a share consolidation and A$5.4 million rights offer, underwritten by RM Capital.

Berend is confident Cyclone is on the right pathway to bring Iron Bear into production to realise the deposit's best potential.

"It's just a question of convincing people that this is a real tier one asset," he said.

He anticipates strong news flow as Cyclone methodically derisks the project, provides test material for potential offtake partners, undertakes engineering studies and assesses DSO potential – all the while working towards attracting a major partner.

"A joint venture will address the main risk of capex," Berend said.

"And we do want to make money for our shareholders."