Magnetite Phase
Overview
The magnetite phase of the Karara Iron Ore Project involves an integrated development of the world-class magnetite deposit at Karara to produce both high grade magnetite concentrate on site and blast furnace quality pellets in north-eastern China.
Karara is a world-class orebody in terms of its scale, quality, consistency and extremely low waste: ore stripping ratio, which will result in relatively low mining costs.
Key Project Metrics
• Resource – 1.853 billion tonnes @ 35.4% Fe (Indicated & Inferred)
• Ore Reserves – 522 million tonnes @ 36.3% Fe (Probable)
• Ore Mined: 497Mt or 20Mtpa in the first 25 years of production
• Waste: ore stripping ratio – 0.5: 1
• 8Mtpa initial production of high grade magnetite concentrate
• Average 68.2% Fe magnetite concentrate grade with low impurities
• 4Mtpa pellet production at a new plant in China, also in joint venture with AnSteel
• Average 66% Fe pellet grade
• 60-year mine life at initial 8Mtpa production rate
2007 Bankable Feasibility Study
Gindalbie announced the results of a positive Bankable Feasibility Study (“BFS”) on the magnetite phase of Karara in September 2007, confirming the economic and technical viability of the project. The BFS contemplates:
• a conventional 20Mtpa open pit mining operation;
• production of 8Mtpa of magnetite concentrate on site at Karara;
• transportation of magnetite concentrate to the Port of Geraldton using rail as the preferred product transport mode, to accommodate future expansion;
• magnetite concentrates to be shipped to China via a process involving transportation on barges to a location off Geraldton for loading to Capesize vessels;
• production of 4Mtpa of blast furnace quality pellets at new JV Pellet Plant at Yingkou Region, north-eastern China; and
• off-take for magnetite concentrate and pellets at Ansteel’s new 6.5Mtpa Bayuquan steel mill at Yingkou Region.
First production of magnetite concentrate and blast furnace grade pellets is scheduled to commence from the second half of 2010.
The key financial outcomes of the BFS were:
• estimated total Project Capital Costs of A$1.706 billion;
• NPV9% after tax of A$2.25 billion, IRR after tax of 24.6% & Project Equity IRR after tax of 37.5%;
• free cash flow after tax from the initial 497Mt Ore Reserve of A$9.33 billion from the first 25 years of operation; and
• average post tax annual free cash flow of A$375 million.
Karara Expansion Project
In April 2008, Gindalbie and Ansteel commenced a Feasibility Study on increasing the start-up base case production rate of the magnetite phase of Karara by 50% to 12Mtpa of high grade magnetite concentrate. Key components of this expansion project include:
• aggressive drilling to increase the current magnetite resource inventory and convert resources to reserves;
• a magnetite exploration target of 2.2-2.8 billion tonnes; and
• a 6-month Feasibility Study to determine the capital, equipment and logistical requirements for the increase production rate. This Study will not impact on the current progress of the Karara development.