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Sino Iron Project
CITIC Pacific’s Sino Iron Project will be a world class,
large-scale magnetite iron ore mining and processing
operation. Located near Cape Preston, 100km
southwest of Karratha, in Western Australia’s Pilbara
region, the project has over two billion tonnes of
identified magnetite resources which can produce
27.6 million tonnes of concentrate and / or pellets
annually (mtpa) for about 25 years. These products
will be exported to CITIC Pacific’s three special steel
plants in China and to other Chinese steel
manufacturers.
In addition to the existing identified resources, CITIC
Pacific has options to purchase the mining rights to
a further four billion tonnes if the reserve is proven,
therefore, taking potential production to over 70mtpa.
Processing on a new scale
Managed by CITIC Pacific Mining, a wholly
owned Australian subsidiary of CITIC Pacific, the
US$4.2 billion Sino Iron Project is the largest
magnetite project planned in Australia. It will be
a highly technical operation requiring significant
processing and supporting infrastructure.
Processing infrastructure will include primary
crushers, grinding mills, a concentrator and pellet
plant. Supporting infrastructure will include a new
port, port facilities, a 25 kilometre slurry pipeline, a
product stockyard, a 450 megawatt gas fired power
station and a 51 gigalitre desalination plant.
CITIC Pacific Mining will conduct its own mining
and has sourced some of the world’s largest mining
handling equipment including hydraulic excavators
and diesel-electric haul trucks.
The new port will include a transshipment facility to
load ships with the product for export to China.
The original estimated capital expenditure for the
project was US$2.5 billion. The latest estimated capital
expenditure is likely to be approximately US$3.5
billion. This increase is due to an expanded planned
production of concentrate by 15% (production
volume was originally anticipated to be 24mtpa and
has now been increased to 27.6mtpa); specification
modifications as a result of ore body characteristics;
industry wide cost pressures and inflation in the global
mining industry, especially in Australia; depreciation
of the US dollar to the Australian dollar and to the
RMB; and cost pressures and inflation in China where
certain supplies are sourced. Since the commencement
of our project in the second quarter of 2006, the global
price of iron ore (fines) has increased from US cents
61.7 per dry metric tonne unit (dmtu) to US cents
132.7 per dmtu, amounting to a 115% increase, which
is more than sufficient to cover the escalation in capital
costs. Given the current price trend of iron ore, we
believe there will be further positive impact on the
business model. CITIC Pacific’s steel plants would also
benefit from the stable supply.
Iron Ore Mining
Open pit
mine
Primary
crusher
Coarse
ore pile
Grinding mills
Magnetite
concentrator
Slurry
pipeline
Dewatering
& pellet
plants
Magnetite
concentrate
& pellet
stockpiles Conveyor Ore
barges
Trans-shipment
loading barge
Bulk
carrier
Sino Iron Project – Magnetite mining and processing for export
Business Review
14 CITIC Pacific Summary Financial Report 2007
Environmental approval given (to
previous proponent company)
CITIC Pacific purchases initial
mining rights
CITIC Pacific Mining formed
Foreign Investment Review Board
approval granted
Exploration drilling progam
commenced
Major Project Status granted by
Australian Government
Signed construction contract
with MCC
MCC acquired 20% equity in
project
Bulk sample of ore for production
testing commenced
Geotechnical drilling continues
Further environmental
management plans approved
State Agreement Act
amendments
Construction commences
First shipment of product to China
Progress in 2007
CITIC Pacific’s mining rights were increased from one
to two billion tonnes in a further agreement signed
in 2007.
In August 2007, the lead engineering construction
contractor for the Sino Iron Project, China
Metallurgical Group Corp. (‘mcc’), entered into a
sales and purchase agreement to acquire a 20% equity
interest in the project (subject to the approval
of the Chinese and the Australian governments). The
construction contract with mcc was also extended
from the initial one billion tonne to the current two
billion tonnes.
Key government approvals for mining and
environmental components were advanced in
consultation with the Western Australian government.
In November 2007, CITIC Pacific Mining and the Sino
Iron Project were publicly launched in Australia.
At the Pilbara mine site in December 2007, a bulk
sample started that will move seven million tonnes of
material. A representative sample will be sourced from
this material to confirm earlier test work carried out
using drill core samples. These results will be used to
confirm the technical specifications for the processing
equipment design.
Major design work in both Australia and China on
the processing elements of the project is advanced,
as well as resource development and mine planning.
Construction has commenced on the first of six mill
lines and crushers at CITIC Heavy Machinery in
Luoyang and the magnetite concentrator at netc
in Anshan.
Long lead items, including gas turbines and gas line
pipe, have already been ordered, and key construction
contractors have been identified for the gas pipeline,
power plant and desalination plant.
Timeline
CITIC Pacific Summary Financial Report 2007 15
Also in 2007, CITIC Pacific Mining purchased the
Mardie pastoral station, on which the mine area and
processing infrastructure is located. Ownership of the
station will improve access to land and also presents
opportunities for environmental improvement
programs to be implemented.
Looking ahead
Subject to relevant Western Australian government
approvals, construction is scheduled to begin in 2008
to allow production of the first magnetite concentrate
from the first mill line in 2009 / 2010. The remaining
mill lines will be commissioned progressively from
2010. The desalination plant engineering and
procurement is progressing and some of the long
lead items have been ordered. First water from the
desalination plant is expected to be available in 2009.
Additional geotechnical drilling will also take place to
further define the mine’s ore body.
2500 jobs are expected to be created during the
project’s construction phase, and 600 operational jobs
over the mine’s 25-year life.
In 2008, CITIC Pacific Mining plans to sign a joint
venture agreement with Central Mining and
Contracting, a Pilbara-based indigenous mining
contractor who is currently providing various mine
services to the project. This joint venture will ensure
local indigenous people benefit through employment,
training and business opportunities in the future.
Strategic value to CITIC Pacific
The Sino Iron project, in conjunction with CITIC
Pacific’s recent order of 12 ships for its iron ore
delivery, will guarantee a secure supply and
transportation of raw materials for the Group’s
steel making operations in China.
Magnetite is one of the principal ores of iron and the
most magnetic of all the naturally occurring minerals
on earth. Its magnetic properties allow it to be readily
refined into an iron ore concentrate for use in steel
making. In the conversion process, significantly less
carbon dioxide is produced than with other iron ore
types, making magnetite increasingly desirable in this
era of environmental awareness.
The iron ore products from the Sino Iron project will
be suitable for specialty steel making where customers
are seeking low levels of phosphorous and alumina.
Building on the expertise that has been developed
within the CITIC Pacific Mining team, in the future,
CITIC Pacific will look at acquisitions or expansions
that will build the company’s iron ore / resources