some great info on why this is about to fly

Yalgoo Iron Project
Project Overview

The Yalgoo Iron Project concept envisages mining 2.4Mtpa of magnetite iron ore from the Yogi deposit 14km east of Yalgoo in the mid west region of Western Australia. The magnetite ore would be crushed and fed into a beneficiation plant located at the mine site to produce around 770,000tpa of magnetite concentrate grading between 65 - 68% Fe.

The magnetite concentrate would be fed into a merchant pig iron plant, located at the mine site adjacent to the beneficiation plant, to produce merchant pig iron in the form of ingots, granules or iron nuggets, depending on the technology chosen. The merchant pig iron can be stored in the open, is easy to handle and would not present a combustion risk or generate dust.

It is currently planned that the product would be transported 233km on the existing Geraldton to Mount Magnet road (a designated road train route) to the Port of Geraldton where it will be stockpiled in the open. Ship loading will, depending on the product's final physical form, occur using either an existing ship loader or a new ship loader being funded and installed by the Geraldton Port Authority for iron ore exports.

The Project also envisages utilising natural gas for power generation and, if required, for reduction of the ore, with the gas sourced from an existing gas pipeline that passes through the Project site.

The merchant pig iron will be exported to Asia for use in electric arc furnace or basic oxygen furnace steel making in a market where the demand for alternative sources of iron is expected to see sustained growth. Securing sales into the Australian domestic market is another possible option.

The Company will also investigate the option of producing iron ore concentrate for sale as an interim step in the development of the project, in order to generate earlier cash flow. Other options that will be considered include sizing the beneficiation plant to enable production and sale of concentrate in addition to the production of merchant pig iron. This would provide an interim step, prior to adding additional capacity to increase overall production of merchant pig iron up to 2.0Mtpa, dependant upon the demand.

Geology & Mining

Ferrowest has secured the ferrous mineral rights to the Yogi magnetite prospect, which forms the basis of the Yalgoo Iron Project. The ferrous mineral rights apply to certain graticular blocks located within the boundaries of the granted exploration licence 59/642, the granted prospecting licence 59/1508 and the granted exploration licence E59/1097. The total area of the ferrous mineral rights owned by Ferrowest consists of 30 graticular blocks, each approximately 300 hectares, for a total of approximately 9,000 hectares that covers the known iron mineralisation.

The iron mineralisation extends for approximately 27km. Four mining lease applications have also been lodged that cover the area where mining would commence.

The banded ironstones which comprise the main targeted iron bearing units of interest to Ferrowest at Yogi can be traced trending roughly north-south on the tenements for approximately 27km. The visible outcrops of magnetite commence just north of the main Yalgoo to Mount Magnet road striking north for approximately 9km through the granted tenement E59/642. From there the BIFs continue northwards through the granted tenement E59/1059 to a larger hill at the northern end of the tenement where the BIFs then fold back on themselves to the south-west.

Due to the presence of magnetite, the target BIF units all show as magnetic "highs" on the aeromagnetic map (Figure 2.3) and can be targeted easily.

The overall iron content of the Yogi BIF is typical of fresh magnetite bearing BIF units and is in the vicinity of 20 to 30% total iron (% Fe). These figures have been confirmed by reconnaissance surface sampling carried out by Ferrowest personnel as well as from limited assays from a small number of exploration drillholes.

At Yogi the folded BIFs are in contact with the Wadgingarra Gabbro to the west. The presence of large bodies of high temperature magmas in such close proximity to the BIF is significant because as a general observation the grain size of the haematite - magnetite is relatively coarse, being visible to the naked eye, suggesting recrystallisation of the original sedimentary grains as a result of being adjacent to significant magmatic heat sources. The coarse magnetite grain size may have significant benefits in the beneficiation process.

A high resolution helicopter borne electromagnetic survey has been completed over the entire area of the Yogi prospect. The iron (magnetite) bearing units making up the Yogi magnetite prospect are easily identified and show out as a strong magnetic anomaly on the Total Magnetic Intensity Map. This survey has generated an accurate map of the location of the BIFs to be explored for iron and these have been confirmed by ground mapping of the outcropping iron in the area.

On the ground, the magnetite outcrops in a series of moderately exposed BIF capped ridges and low hills. These ironstone capped hills rise to a maximum of about 100 metres above the surrounding plain and have varying amounts of exposed magnetite - haematite BIF present. The hills themselves are no more than 500 - 750 metres long and in lower lying areas the outcrops are poorly exposed except in crosscutting creek beds.

The presence of strongly magnetic rocks juxtaposed with more haematitic rocks suggests that the tops of the hills are in fact a transition zone between pure haematitic BIFs, now eroded, and fresh underlying magnetite. It is anticipated that the more haematitic BIFs will give way completely to fresh magnetitic rocks at fairly shallow depths (expected to be less than 30 metres). This suggests that there should be low pre-stripping volumes to expose the pure magnetic BIFs. This would also lower mining costs in the early years of the mine's development.

In several places magnetite rich BIF has been recovered by Ferrowest from surface outcrops along the strike of the mineralisation. An initial series of tests on a relatively small magnetic surface rock chip sample (YGS 007 from 483400mE, 6868910mN) was subjected to crushing to a relatively coarse grind size (90% passing 63µm) followed by a Davis Tube Test to determine the basic magnetite liberation characteristics and possible concentrate chemical analysis. This sample produced a very good iron recovery coupled with a low silica return at a coarse (and therefore cost effective) grind size. The results are shown below.

Sample Number Easting Northing Total iron % Grind Size (Microns) % Fe in concentrate % SiO2 in concentrate %P in concentrate
YGS007 483400mE 6868910mN 30.33 63 66.48 5.66 0.011


Mining of the orebody would be by simple open pit methods utilising a fleet of haul trucks, excavators and ancillary mining equipment such as blast hole drill rigs, bulldozers and graders. The Project site is such that the beneficiation plant and merchant pig iron plant will both be located a short hauling distance from the pit exit point(s).

The orebody will initially be drilled to a depth of 130 metres and this depth will be used for mine planning. However, if optimisation studies show that all ore to this depth can be mined profitably, it may be possible to deepen the pit.

It is likely that Ferrowest will contract the services of a recognised mining contractor to conduct mining operations at Yalgoo. Grade control of the mining operation will be managed in-house by Ferrowest as this is a critical function to ensure optimum beneficiation plant efficiency.

Mine planning will also take into account the option of increasing the production of merchant pig iron by adding further production modules to the process plants in later years.

[Return to the top of the page]

Project Infrastructure

The Project is located 14km from the rural and mining township of Yalgoo, which is expected to house the mining and operations staff and provide the administrative centre for operations.

A natural gas pipeline passing through the Project area in close proximity to the proposed plant site will have sufficient capacity to provide gas for processing and for the generation of electricity.

Electricity demand of approximately 25MW would be supplied by a gas turbine power station contracted on a build, own and operate basis.

The Geraldton - Mount Magnet Road, passing through the Project site, is a sealed road freight corridor suitable for road trains, providing an excellent quality, low capital cost opportunity for the transportation of merchant pig iron to the Port of Geraldton. The road trains could also back-load the coal supplies that would be required with any coal based technology for the production of merchant pig iron.

Transportation studies will also give consideration (particularly in regard to future increased production) to:


trucking merchant pig iron to Mullewa and then transferring to rail for delivery into the Port of Geraldton; and
restoring the narrow gauge rail line from Mullewa to the Project site along a pre-existing rail easement, a distance of 134km.

Saline water (<2,000ppm TDS) is available within the Project area. Potable water needed for product washing, laboratory and human consumption could be obtained by the use of a reverse osmosis plant.

There is an airfield at Yalgoo that can meet urgent logistical needs and is suitable for the Royal Flying Doctor Service in emergency situations.

In general, operations staff would be housed at Yalgoo, with tourist type coaches providing pick-up services from Geraldton and major regional centres if a demand arises.

The Port of Geraldton is expected to have the capacity and materials handling capability to provide for the unloading, storage and ship loading of the merchant pig iron. In addition the Geraldton Port Authority is constructing a new loading facility on berth 5 which will be dedicated to iron products. During the study phase, agreement will need to be reached with the Port of Geraldton Operations on port access, location of stock piles, loading facilities and a shipping berth.

Merchant pig iron does not generate dust and will not contaminate ship loading equipment used in the handling of other products through the port. Therefore there will be no requirement for a dedicated berth or specialist loading equipment.

Depending on the technology chosen merchant pig iron production will rely on either natural gas and/or coal as the major external consumable. If coal is required, the Company will investigate the cost benefit of using either the lower grade Western Australian coals or the higher grade (but more expensive) coal sourced from the east coast. Coal imports can be handled through the Port of Geraldton, if required, or railed from Collie to Narngulu or Mullewa. In either case, coal can be back-loaded to the mine site in the empty trucks that have delivered the merchant pig iron to the port or rail head.

[Return to the top of the page]

Magnetite Concentrate Production

Approximately 2.4Mt of magnetite ore is proposed to be mined annually to produce around 770,000tpa of magnetite concentrate and from that, 500,000tpa of merchant pig iron. Selective mining of the ore, to exclude any portions of the resource which would otherwise require excessive grinding, will optimize the process efficiency. This will require detailed grade control during mining and provide significant dividends in reduced equipment sizing and lower processing costs.

Crushed magnetite ore will be concentrated in a conventional beneficiation plant comprising grinding, magnetic separation and dewatering circuits to produce magnetite concentrate. The need for reverse flotation to further increase magnetite recoveries will be assessed during the study phases but very preliminary indications suggest that it will not be required.

The Scoping Study will examine the option of producing and selling magnetite concentrate as pellet or sinter feed to generate early cashflow for the Project. The staged introduction of merchant pig iron production and its ramp-up to full capacity would provide increased cashflow from a higher value product and permit staged commissioning of process plants. Further production capacity could then be added over time to increase merchant pig iron production and phase out concentrate sales.

The beneficiation plant will be designed to facilitate expansion so that additional merchant pig iron making capacity can be installed at a later date to increase production from the planned 500,000tpa, up to an eventual 2.0Mtpa. The economics of the various production scenarios will be analysed during the study phase to determine the optimum initial plant configuration.



Preliminary Davis Tube testwork has been conducted on a sample obtained from an existing drillhole and a surface grab sample yielding the results shown in Table 2.4

Davis Tube Test Results YGS7 YGS7 BM08 55
Sample type Surface outcrop Surface outcrop RC drill hole
Grind Size 98% Passing (µm) 100 63 75
Mass recovery to concentrate % 27.4 26.0 32.53
% Fe in concentrate 64.9 66.5 64.1
% SiO2 in concentrate 7.84 5.66 4.00
% P in concentrate 0.012 0.011 0.017


Table 2.4 demonstrates that a concentrate appropriate for testing of the merchant pig iron process technology can be produced at a relatively coarse grind size. While testing during the feasibility studies will be undertaken across a representative collection of samples taken from throughout the orebody, the relatively coarse nature of the Yalgoo Iron Project banded ironstone is expected to lead to a simple and low cost beneficiation route.

[Return to the top of the page]

Merchant Pig Iron Production

Ferrowest intends, subject to finance, to invest approximately $15.5 million in the preparation of a Bankable Feasibility Study for the Yalgoo Iron Project.

The business plan of Ferrowest is focused on 'adding value' to the potential of the Company's magnetite mineralisation by downstream processing the iron into a form of merchant pig iron.

As part of the studies Ferrowest will evaluate a number of merchant pig iron making technologies for use in value adding to the planned magnetite concentrate in order to produce a high grade iron product suitable for export.

Gas based technologies such as the MIDREX® Direct Reduction Process, HYLIII® and Circored will be evaluated against coal based technologies including FASTMET®, FASTMELT®, Corex, Circofer and a new emerging technology, the ITmk3® process that produces high purity (~96%Fe) iron nuggets.

The alternative iron making technologies, listed in Tables 2.1 and 2.2 are classified as:


direct reduction, where iron ore is reduced to metallic iron at temperatures lower than the melting point of iron; or
smelting reduction, in which liquid iron is produced and then cast or formed into merchant pig iron.

Table 2.1 Major Direct Reduction Processes

PROCESS FEED OUTPUT STATUS
Gas/Shaft
MIDREX® Iron ore lump or pellets / Gas DRI Commercialised technology
HYL III®, IVM Iron ore lump or pellets / Gas DRI Commercialised technology
Gas/Fluid Bed
FIOR Iron ore fines / Gas HBI Commercialised technology
FINMET® Iron ore fines / Gas HBI Improved FIOR. Australian HBI plant closed
Circored® Iron ore fines / Gas HBI Commercially operational in 2001
RHF or RKF
FASTMET® Iron ore concentrate / Coal DRI or HBI Commercialised technology
FASTMELT® Iron ore concentrate / Coal MPI Commercialised technology
ITmk3® Iron ore concentrate / Coal MPI (Nuggets) Demonstration plant operated
Fluid Bed
Circofer® Iron ore fines / Coal HBI Pilot plant operated


Table 2.2 Major Smelting Processes

PROCESS FEED OUTPUT STATUS
COREX® Iron ore lump or pellets / Coal MPI Commercialised technology
HIsmelt® Iron ore fines / Coal MPI Commercial operation commenced
ROMELT Iron ore fines / Coal MPI Semi-commercial plant
TECNORED Iron ore lump or pellets / Coke MPI Demonstration plant
AUSMELT Iron ore fines / Coal MPI No commercial operation


Ferrowest's view, ahead of the detailed studies, is that the ITmk3® process from Midrex has excellent potential for the Yalgoo Iron Project, should it become available to the Company in the project's development timeframe. The ITmk3® process, described below, is typical of the emerging merchant pig iron production technologies, one of which Ferrowest will adopt in order to add value to its magnetite mineralization at Yogi.

ITmk3® is the so called third generation of iron making. The first generation is the blast furnace and the second generation is gas-based direct reduction of iron oxides. ITmk3® is a coal based reduction process which utilises the well proven and commercialised rotary hearth furnace (RHF) technology used for decades in the iron and steel industry worldwide. ITmk3® produces metallic iron nuggets in a single process at a relatively low temperature of 1350ºC and emits approximately one third less carbon dioxide than the blast furnace route.

The ITmk3® process utilises pulverised coal as a reductant which is mixed with iron ore concentrates (magnetite or haematite) and a binder to form a "greenball" pellet. The "greenball" pellets are dried prior to loading into the rotary hearth furnace where reduction of the iron oxide pellets to metallic iron takes place.

After reduction, the furnace temperature is raised in the melting zone and the iron melts to form a nugget and a slag nodule which are quickly cooled in the next zone. The cooling process separates the slag nodule from the iron nugget.

The ITmk3® Process is an elegantly simple process as shown in the flow sheet below with a one-step furnace operation that requires less energy and capital, with lower operating costs than existing iron making technology. Consequently, a high quality iron product is produced at a substantially lower cost.



[Return to the top of the page]

Markets for Merchant Pig Iron

The growth in the world's crude steel production over the last decade is shown at Figure 2.16. The Asian growth shown in figure 2.16 indicates that Ferrowest's Yalgoo Iron Project is strategically located to service the fastest growing steel production region in the world.

While merchant pig iron can be used in BOF or EAF steelmaking, it is the EAF market, where most furnaces are fed with scrap, that there is expected to be the greatest demand for high grade iron products. This is because pure iron units are required to reduce the overall percentage of tramp elements, introduced by the scrap feed, in the steel melt. For instance, thin slab casting from EAF furnaces requires around 25% of pure iron units. Ferrowest's merchant pig iron will be a quality source of the required pure iron for the EAF market.

EAF steel making as a percentage of total steel production has increased over the last decade in every major steel producing region in the world except Asia. This demonstrates the ascendancy of EAF steelmaking compared to the more capital intensive and the less environmentally friendly blast furnace / BOF route (BF/BOF).

The relative drop in EAF production as a percentage of the total steel production in Asia was limited to Japan and to a lesser extent, Taiwan and China. In China and Taiwan EAF production did increase solidly in real terms but simply failed to keep pace with the expansion of BF/BOF growth. In Taiwan, all EAF production growth was fed by imported scrap, suggesting that scrap availability was a factor in EAF production falling behind BF/BOF growth. In China, where total steel production growth over the decade was a phenomenal 185%, BF/BOF production increases were the only option to sustain such high production growth, given the limited availability of scrap.

Growth in Japanese steel production by contrast has only been 11% over the last decade. Japan does not import scrap in any material quantities and actually exported 6.8Mt of scrap in 2004. With no material growth in new steel making capacity and long established BF/BOF plants, Japan is yet to embrace significant EAF steelmaking investment.

The world wide increase in the proportion of EAF production and the scrap related constraints on additional EAF production in China and other Asian countries provides a very good environment for Ferrowest's merchant pig iron feedstock for EAF steel making.

Countries that consume scrap for steel making are prime target markets for Ferrowest. The region with the largest net importation of scrap in the world is Asia with a net import of over 20Mt in 2004. The largest net consumers of scrap in 2004 were China (10.1Mt) and South Korea (7.3Mt), with Sri Lanka (3.7Mt), Malaysia (3.2Mt) and India (2.1Mt) also significant importers. The only significant exporter of scrap in the region is Japan (6.8Mt).

The Yalgoo Iron Project has a shorter shipping distance to these scrap consuming markets than the main scrap exporting regions of North America and the C.I.S. This will, in the event of production, provide Ferrowest competitive entry into a key market for merchant pig iron as a scrap supplement (source of uncontaminated iron units) and as a scrap substitute.

As the demand for steel increases throughout the world, and with particular focus on China, the availability of clean low impurity Fe units as feed to EAF and BOF steel making is increasingly being put under pressure. Alternative iron sources for steel making such as DRI and merchant pig iron constitute up to 30% of feed to these steel producing routes. The salient qualities of merchant pig iron will see it compete strongly in this alternative iron market.

The marketing of the proposed Yalgoo Iron Project production output of 0.5Mtpa will not require any material market penetration in this world growth scenario. The high iron grade of merchant pig iron and its ease of transport will make it a feedstock of preference, while the overall growth in world demand for scrap and scrap substitutes should sustain higher comparative average prices than has been the case historically, although the price variability (following scrap availability) is likely to remain.

China is currently the primary driver of world steel demand and assuming a similar steel intensity (kg consumption of steel/capita) to Japan and the USA, an eventual three fold increase in steel intensity in China is possible. The Chinese government has taken actions to stem growth in the steel industry but these have been of limited effect and the reality of steel demand in an economy locked into apparent sustained high growth leaves little practical alternative than to allow growth in steel production.

The Yalgoo Iron Project is geographically well placed to participate in this growth in Asia, with a natural shipping cost advantage for niche markets for EAF feedstock supply with demand in Indonesia, Malaysia, India, Sri Lanka, the Middle East and even here in Australia.

Merchant pig iron, being a high quality slag free iron product with low impurity levels, is easy to handle and re-melt and is an ideal alternative iron source for steelmaking.

Ferrowest's Yalgoo Iron Project is ideally positioned to take full advantage of future "alternative" iron demand increases.

[Return to the top of the page]

Project Capital & Operating Cost Estimates

This section provides indicative capital and operating cost estimates for the Yalgoo Iron Project based on the ITmk3® process route to produce iron nuggets. They are provided here as a guide only. The costs shown here are considered to be conservatively based and it is expected that the feasibility studies will identify some lower costs as the Project planning is refined and key cost elements are competitively tendered. Equally, it is possible that some costs quoted here may prove to be higher than estimated.

Operating Costs

Operating costs have been estimated from indicative quotations received or derived from first principles using consumption data and rates from industry sources. A "long term average" sales price has been adopted that is below current rolling 12 month average prices. Merchant pig iron prices have ranged as high as A"450 per tonne in the last year and as low as A$305 per tonne. Higher long term fuel prices have also been factored into the estimates.

Operating Cost Estimate Basis A$/t Ore A$/t Iron Nuggets
Mining, Crushing & Screening Costs Estimate $8.00 $38.40
Beneficiation Costs Estimate $7.09 $34.05
Iron Nugget Manufacture Estimate $89.34
Road Transport (Higher fuel costs factored in) Estimate $16.48
Product Handling (Mine + Port) Estimate $8.00
Admin. & Corporate Estimate $2.00
Direct Operating Cost $188.27
Sales Revenue (Long term average) Assumed $367.00
Royalty (Assumes 3.5% - downstream processing) DoIR $12.85
Operating Surplus Per Tonne $165.88
Exchange Rate A$1 = US$0.75


Capital Costs

The capital cost estimate takes into account all currently anticipated capital expenditure which the proponent of the Project is likely to bear. In addition to the construction estimates for the various plants, this estimate also includes incidental costs such as pre-stripping of the mine, recruitment and training of the workforce, first fills of spares and consumables and the values of materials "in work" to fill the various stockpiles throughout the production chain (to the point of export). Given that no studies have yet been conducted, the capital cost estimate also contains a $55,000,000 contingency amount (20% of the total capital cost estimate).

Capex Estimate - 500,000tpa A$'000,000
Beneficiation & Iron Nugget Plant 201.5
Mine & Ancillary Capital Expenditure 73.5
20% Contingency 55.0
Total Capex 330.0


[Return to the top of the page]



This website is optimised for viewing with Internet Explorer 6.0 or better. Using other browsers may have unpredictable results.