australasian resources gaines chinese supporte

This is from RESOURCESTOCKS August edition.
Any typing errors are mine as I dictated it into Dragon Naturally Speaking a dictating softwae package.
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AUSTRALASIAN RESOURCES GAINES CHINESE SUPPORTERS

A strategic alliance with China's fourth largest steelmaker, Shougang Corporation is the ideal Philip for Australasian Resources as it develops its 2 billion Balmoral South iron ore project. By Mark Mentiplay.

Major Chinese interests are underwriting the development of a huge new iron ore sub - province in Western Australia's Pilbara to ensure supply for the Asian nations, insatiable steel - making machine. The key players are its forth - largest steelmaker, Shougang Corp, and Chinese government - controlled Citic Pacific. Their target is the massive Balmoral iron ore project near the infrastructure - rich north-west coast.

Australasian Resources expects first high- grade concentrate from its world-class $2.5 billion Balmoral South iron ore project in 2010, to be followed the next year by pellet production and hot briquetted iron (HBI) soon after.

It is an ambitious plan - based on the right to mine 1 billion tonnes of Magnetite grading 31.3% or from current indicated resources of 744 million tonnes at 31.4%, including probable reserves of 547 Mt at 32.7% - that has come together in a very short time.

The immediate focus is the successful completion of a bankable feasibility study (BFS) by March next year. That will trigger Shougang’s decision by June 2008 to extend an interest - free facility to cover the entire project cost, and off - take agreements for its entire production over the following 25 years, with a guaranteed minimum off - take of 12 Mt pa.

It was only about nine months ago that Australasian, formerly Sherlock Bay Nickel acquired Balmoral South’s parent company, International Minerals, from Clive Palmer's Mineralology. That resulted in Mineralogy taking a majority stake in the company.

Consummation of the project funding deal will give Shougang a 50% stake in International Minerals, and Australasian the balance, with the loan repayment structured from cash flow over 15 years.

Balmoral South and its Suzanne Palmer Magnetite deposit are about 80 km south west of the iron ore town of Karratha.

The project is aiming to supply three products from an initial 11.5 Mtpa - 5 Mt of near - 70% concentrate, five Mt of palettes and 1.5 Mt HBI - worth over $1 billion a year at full production at current prices.

But as the knife salesman says: “there’s more”- much more.

Mineralology holds a massive, independently assessed potential iron ore resource of between 60 Bt and a hundred Bt of Magnetite - banded iron formation that stretches over 20 km north of the Balmoral South project to the coast.

Mineralology has held the greater Balmoral deposits, thought to be among the world's largest undeveloped Magnetite resources, since 1986 and in that time spent over $50 million on them.

The quality of the assets within the greater Balmoral project is underscored by the 2006 development agreement between Mineralology and Citic Pacific, a Hong Kong - listed company with the Chinese government as a major shareholder.

Citic Pacific paid Mineralology $260 million for the right to mine and initial 1 Bt, with an option of up to 6 Bt, from the Central George Palmer deposit, which abuts Australsians project. Citic Pacific's first 1 Bt iron ore project is scheduled to produce its first export ore in January 2009.

Australasians low - risk aspect is further enhanced by its agreement to share Citic Pacific's infrastructure, including the port it is building nearby, and a strategic alliance with Shougang. The big Chinese steelmaker and associates have already put $56 million into the company via a placement, and another $42 million in options will give Shougang a fully diluted near - 20% stake, if all goes well.

“ The upside for us is fantastic and pretty much underwritten by the existing and potential agreements we have with Shougang," Australasian managing director Andrew Caruso told RESOURCESTOCKS.

"This project is being funded out of China to make this location a major iron ore supply source for China's ongoing steel making capacity - a major Consolidated investment to underwrite China's future.

" Shougang no Magnetite, they like it on While there are other Magnetite deposits in Australia, they want ours. Shougang have at least 40 years experience in Magnetite and we can leverage off that in terms of mining, process design and construction," Caruso said.

Shougang is building a huge new 10 Mtpa steel production, processing and port facility near Tangshan, South - East of Beijing.

An engineering review study for Australasian by Promet Engineers, based on the feasibility work for the neighbouring George Palmer deposit, envisages construction of a 12Mtpa Magnetite concentrator, a 7 Mtpa pellet plant and a 1.45Mtpa commercially proven Midrex DRI/HBI plant.

Caruso is quick to point to the proven track record of Midrex plants. There are about 50 operating around the world with another eight under construction.

Under the above development scenario, product will be transferred from site to the nearby port facilities, which Citic Pacific is building, via a 25 km pipeline or conveyor. Australasian will contribute to construction out of its total project budget.

“ The result will be a fully integrated mining, processing, transport, stockpile and port facility close to existing north-west shelf energy sources and other infrastructure,” Caruso said.

Specialist independent London - based iron and steel industry consultant James King has concluded that, based on the Promet cost estimates, the expected unit operating costs for the potential pellet and DRI production from the Balmoral South project would be highly competitive, falling within the lowest - cost quartile in the world for traded pellets and DRI.

Australasian only began fieldwork and drilling on the Balmoral tenements in February 2006 and has completed over 16000 m of drilling to date.

There are four drilling rigs on site aimed at upgrading a big chunk of the 1.12 Bt resource to the higher - measured category.

Crusoe said results to date confirmed the excellent quality of the Magnetite mineralisation at Balmoral South, its ability to produce a high-quality concentrate of 69.2% iron with very low impurity levels and the ability to lift that to over 70% with finer grind and/or flotation work. All of which bodes well for the BFS.

Australasian is also moving quickly to bring on its original namesake Sherlock Bay Nickel Project, just east of Karratha and near Balmoral South, which contains an estimated in - ground $6 billion worth of the stainless steel additive.

Crusoe said work in 2007 - 08, to produce a bankable feasibility study on the project, which has a JORC mineral resource of 25.4Mt at 0.4% nickel (72% indicated or measured), equivalent to 101, 000 t of nickel, is likely to include an on - site bulk leaching trial.

Right now, the company is looking at a bacterial heap leach operation with very low operating costs and a plus - 10 year mine life at 2Mtpa, with test work showing 90%.

Column test work, in order to further investigate acid demands and supply, is near completion with results showing success in generating free acid, which could reduce acid consumption costs.

The company has tested only 2 km of the 18 km Sherlock Bay shear zone, and with the ore body, remaining open along strike and at depth, remains confident of further discoveries. As with Balmoral South, the project is well located near major infrastructure.

Other nearby strings to the Australasian bow are its Copper Bore Well and Mt Salt uranium prospects, the former previously identified as having copper - uranium potential, following shallow nearby drilling by Esso in the 1970s.

Airborne radiometrics have identified a 20 km long by 4 - 5 km wide, anomally at Mount Salt, which will be included in a budget of up to $4 million that Australasian has set aside for exploration beyond Balmoral South.

Major Shareholders
(fully diluted, assuming exercise of all options).

Mineralology (Clive Palmer) 59.3%
APAC resources (Shougang) 8.4%
Shougang Concord International 8.4%.
Australian Mineral's Hong Kong (Shougang) 3.1%