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Balmoral South Project — Optimising the Competitive Edge


Author/s: A Caruso
Paper ID: 706002
Year of Publication: 2007
Volume Title
Conference Proceedings - Iron Ore 2007


Abstract:

Australasian Resources Limited, through its wholly owned subsidiary International Minerals Pty Ltd, plans to develop the world-class Balmoral South Iron Ore Project in the Pilbara region of Western Australia. Already, Chinese concerns have committed over US$1 billion towards the development of the adjacent project being developed by CP Mining Management Pty Ltd.

The Balmoral South Project involves the mining and processing of one billion tonnes of magnetite ore from the Susan Palmer deposit to produce premium iron ore products for export.

Balmoral South has significant strategic advantages that give it a competitive edge over other magnetite development projects, including:


being party to a State Agreement with granted mining leases,
bulk scale test programs have proven that premium iron ore products can be produced,
the expected unit operating costs for the potential pellet and direct reduction iron (DRI) production from the project would fall within the lowest cost quartile in the world for comparable products,
it is located only 30 km from the Pilbara coast with no rail infrastructure requirements,
the deposit has a relatively low strip ratio,
access to an approved port under a capital and operating cost sharing basis,
adjacent to the major North West Gas Field, and
full access to $50 M of feasibility study work completed by Mineralogy Pty Ltd over 20 years.

Transforming favourable project fundamentals into a robust implementation model is crucial towards the success of the project and is vital in order to counter uncertain market conditions and escalating development costs in the current environment.


Australasian Resources is currently focusing on specific initiatives to leverage off the Project’s strategic advantages and optimise its design and implementation, including:


optimising project value – resource to product:
options studies and scenario planning;
cut-off grade strategies to maximise Ore Reserves;
mine to mill studies;
high productivity operating strategies – mining, processing;
product flexibility for markets;
application of new innovative processes and technologies; and
risk management.
2. optimising implementation:
utilising a superior location,
leveraging off Chinese partner’s expertise and capability,
using offshore modularisation,
realising synergies with adjacent companies, and
developing vendor alliances.
ADDENDUM

Australasian Resources finalised negotiations with China’s fourth largest steelmaker, Shougang Corporation and its associated entities in March 2007 for the placement of A$56 M with A$42 M attaching options into the Company, which provides a solid platform for the development of the project.

Following completion of a feasibility study in 2008 and an election to proceed by Shougang to full-scale project development, Shougang Entities shall earn a 50 per cent interest in the project by:

financing 100 per cent of the project funding (in excess of US$2 billion) through an interest free project loan,
guaranteeing the purchase of 100 per cent of iron ore products from the project, and
constructing the project or guarantee construction by another suitable constructor.