boo at 1.12 hehehe, page-7

The announcement today by Yilgarn gives confirmation of the Karara JV partners intention to expand their future production.
In that case, the SCE comment below, now comes into play.

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25Mtpa expansion case
The increases in both magnetite and hematite resources open the way for larger scale projects than originally planned. It has become clear that the large magnetite resource could support staged expansion from the original 8Mtpa to 18Mtpa of high grade magnetite concentrate.
Similarly, the expanding hematite resource and further potential could lead to an increase from the original 4Mtpa to 7Mtpa. With a medium term resource potential of 40Mt, a six year mine life is indicated.

Expansion Case: 18Mt magnetite
7Mt hematite DSO
The Port of Gerladton is planned to provide initial stage capacity for 12Mtpa of GBG’s product, comprising: DSO hematite at an initial rate of 2Mtpa increasing to 4Mtpa through the new dedicated iron ore Berth 5; and 8Mtpa magnetite concentrate from the yet to be constructed Berth 6.

Further expansion of both hematite and magnetite production will require additional port capacity, planned to be supplied by a new port 20km north of Geraldton at Oakajee. The development of Oakajee is being driven by a consortium led by Murchison Mtals and Mitsubishi, and specialist infrastructure organisation who are planning to have the port in operation by 2012. Their proposals include providing $3B of port and rail infrastructure for open access use.

Expansion to 25Mt pa takes our DCF valuation of GBG to $2.50 per share.

This assumes additional capex of $600M to expand the magnetite/pellet project and $50M to lift hematite output.

DCF (25Mtpa) $2.50 per share
The major works required to expand magnetite product output would be: mine development; mine infrastructure; expansion of the concentrator; materials handling and port site works; pellet plant expansion (+5Mtpa capacity). Rail and port facilities would be provided by their owners, with GBG to pay user charges.
The cost of hematite expansion would be relatively minor, covering mine development, mine site and port site handling.