Mindax study highlights early mining at Mt Forrest DSO iron project
Mindax (ASX: MDX) has completed an updated Scoping Study that demonstrates the initial Mt Forrest DSO Project in Western Australia can produce 2 million tonnes per annum grading 60% iron for five years.
The study also demonstrates mining could potentially commence at Mt Forrest by mid-2015.
The study will form the basis for the Mt Forrest Joint Venture with Hong Kong’s Perpetual Mining Holding Limited (PMHL) to undertake a detailed Feasibility Study.
The
updated study incorporates the new detrital iron resource of 24Mt
grading 40.3% iron and regolith Resource of 27.1Mt at 44% iron from the
recent update. DSO mining is forecast to begin in mid-2015.
The project has an estimated capital cost of $177 million and operating costs of $85 per tonne FOB.
Notably,
it opens the way for potential subsequent large scale magnetite
production with the presence of existing mine site and infrastructure
expected to facilitate this transition and reduce costs.
Work
programs to secure regulatory approvals for DSO production are
progressing well and are advanced well beyond Scoping Study stage.
Scoping Study
The
focus of the new work has been to take a holistic approach to the Mt
Forrest Iron Project, with detailed emphasis on the initial DSO phase.
This
has determined that the inclusion of the new 24Mt grading 40.3%
detrital iron resource has made the DSO project viable as a stand alone
project, though it has also been planned to ensure an easy transition to
magnetite mining.
DSO mining will uncover large sections of
magnetite resource ready for mining while the initial Initial mine
infrastructure and equipment will be selected wherever possible and
sited such that it can be used for magnetite mining when DSO mining is
completed.
This reduces capital and operating costs and minimises the operations footprint.
DSO Project
The overall scope of the initial DSO Project is:
- Production of 2Mt per annum of final product 60% Iron concentrate for a 5 year period;
- Road haul to Menzies via purpose built single lane private haul road;
- Rail transport from Menzies to Esperance;
- Product export from expanded Esperance Port;
- Total product cash costs FOB Esperance A$85/tonne;
-
Investment Cost, (including Feasibility Study (FS) and mine development
including Build Own Operate (BOO) or Build Own Operate and Transfer
(BOOT) items), of A$177M;
- Focus on reducing own initial capital
costs by a series of BOO and BOOT commercial contracts for mine site
plant operations and major infrastructure; and
- Mine start up mid 2015 which is generally consistent with the published expansion timeframe for the Esperance Port.
A
mine plan has been developed to exploit the regolith and detrital ore
bodies that are near or at surface and have a low strip ratio, with the
regolith material comprising the bulk of the material mined. This has
taken into due consideration all factors impacting economics.
The low material strength and shallow mine pits enable low cost surface mining techniques to be used.
In
addition, metallurgical test work has been undertaken on regolith and
detrital material to establish processing recoveries, confirming it can
be upgraded to final 60% iron concentrate product using standard
metallurgical separation techniques.
It may be possible to
increase mine life by a further year to six years total by incorporation
of other regolith material, which is present on the mine site but not
yet included in the Resource inventory.
The Mt Forrest mine
layout has been designed to minimise operating impact footprint and
expose large sections of magnetite mineralisation for future mining.
Logistics
Mindax has determined the most cost effective logistics solution is via a new
private haul road from Mt Forrest to Menzies, new rail loading siding at
Menzies and use of existing rail infrastructure from Menzies to
Esperance, with product exports from the planned expanded Esperance
Port.
Use of a private road facility from Mt Forrest to Menzies
reduces capital and operating costs which would be required for the
existing road and lowers operating costs by use of larger vehicles.
Discussions
with logistics and infrastructure providers are ongoing. The company is
actively involved in the Esperance Port Upgrade process with the aim of
securing some of the planned new port capacity.
Capital Cost
The forecast investment of $177 million includes costs for feasibility study, mine development and infrastructure.
Major
cost items include, mine processing plant, mine infrastructure
(including roads, bore field, power plant and earthworks), mine camp and
haul road from Mt Forrest to Menzies.
It is intended that
significant items will be the subject of BOO or BOOT commercial
contracts with third party providers. Reductions in overall investment
costs will be pursued in future work programs.
Operating Costs
The
forecast operating cash cost of $85/tonne FOB includes port charges,
rail and road haul, processing, mining and administration costs.
The
largest single cost is for the logistics path in transporting the
product from the mine to the customer and a key focus of future work
will be to reduce this cost.
Environmental Matters
Considerable
work has been undertaken to prepare the regulatory approval submission
to the Environmental Protection Authority (EPA) with much of this work
in excess of the requirements for a Scoping Study.
Environmental
surveys are substantially complete with only some current spring survey
work underway. No species listed as endangered under State or Federal
legislation have been recorded which should allow for a more streamlined
approval process.
Subsequent Magnetite Production
Upon
completion of DSO mining, large sections of Magnetite mineralisation
will be exposed and available for mining. The DSO mine site will be
established with infrastructure and some processing plant which can be
used to facilitate the transition to magnetite mining.
The
original April 2012 Study reported a robust case for magnetite mining at
10Mtpa for an 18 year period. Further assessments of future magnetite
mining scenarios will be made in due course.
Forward Plan
It is planned for the Mt Forrest Iron Project to be developed in a Joint Venture (JV) with PMHL.
Current Mindax subsidiary, Yilgiron Pty Ltd (YPL), will become the JV vehicle with
PMHL taking a 51% stake for a consideration of $52.3 million.
An independent expert’s report regarding the planned JV with PMHL is being prepared for all shareholders.
Once
formed YPL will commence the Feasibility Study for the Mt Forrest Iron
Project using the updated Scoping Study as its basis.
Subject to
securing regulatory approvals for the project and satisfactory FS
outcomes, it is currently predicted that DSO mining will commence at Mt
Forrest around mid-2015 which is generally consistent with the planned
Esperance Port capacity upgrade.
A key part of the Feasibility
Study will be to examine ways to reduce initial investment costs and to
reduce operating costs and to confirm future project program.
Analysis
The updated Scoping Study is a strong starting point as the current
price of iron ore at $130 per tonne for DSO would generate very robust
cash flows and profit margins from the Mt Forrest DSO Project, given
forecast operating cash costs of $85 a tonne.
The study will also
seek to optimise future magnetite mining by exposing mineralisation and
utilising as much common infrastructure as possible.
The single largest cost is for the logistics path in transporting the product from the mine to the customer which Mindax has indicated will be a key focus of future work will be to reduce this cost.
In all, a very promising scoping study that is value accretive for Mindax given the prevailing iron ore price and potential cash flows and ability to start mining in 2015.
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