Green iron hopeful Magnetite Mines has signed a heads of agreement with the Australian subsidiary of Japan’s JFE Shoji Corporation – one of the country’s largest iron players.

Under the agreement, JFE Shoji Australia will look to provide funding for the completion of the Razorback iron ore project’s Definitive Feasibility Study.

This study will look into whether Magnetite Mines’ plan to tap into a massive deposit of iron in South Australia’s northeast is feasible.

The untapped Razorback Iron Ore tenement contains about 2 billion tonnes of mineable ore, and mineral resources at about 3.2 billion tonnes.

CEO Tim Dobson hopes his company will be a major player in South Australia’s green iron future and intends for the ore to be used in green steelmaking powered by hydrogen energy.

In exchange for JFE’s funding, the Japanese company will receive magnetite concentrate production offtake rights for up to 10 per cent of stage one production over a 15-year term at Razorback.

The two parties will aim to execute a definite agreement covering the plan by 31 January 2025.

In an ASX statement, Magnetite Mines said the Razorback project would “be best developed via a joint venture with motivated investors and offtake partners, and with Magnetite Mines as the operator of the project”.

“This format has been used extensively and successfully in large-scale Australian resource projects over recent decades and has the benefit of sharing the capital and risk burden between the JV partners,” Magnetite Mines said.

“Australia and Japan have a long and successful history as trading partners, and it is natural that both countries will continue to work together towards decarbonisation objectives as the world tackles climate change challenges.”

Dobson said his company had established a strong relationship with JFE over the past year.

“We are delighted to formalise our collaborative efforts today, the culmination of a comprehensive due diligence effort and the first stage of what we envisage will be a long and prosperous relationship for both parties,” he said.

JFE Shoji Australia managing director Koichi Sawada said he was pleased to secure the agreement “to work with Magnetite Mines towards the development of the Razorback Iron Ore Project”.

“Through our due diligence we have gained a good understanding of the Razorback deposit and we see tremendous opportunity in this project that is highly aligned with our strategic priorities, including supporting global efforts to decarbonise steelmaking,” Sawada said.

Mining and Energy Minister Tom Koutsantonis congratulated the company on penning the agreement.

“The South Australian Government recently released our Green Iron and Steel Strategy, and today’s announcement by Magnetite Mines aligns with the fundamental objectives of that strategy,” he said.

“South Australia has a key advantage with abundant magnetite resources, which presents the opportunity for the state to be at the vanguard of efforts to meet the world’s increasing demand for green iron.”