iron exploration gains momentum

http://www.adelaidenow.com.au/business/sa-business-journal/iron-exploration-gains-momentum/story-e6fredel-1226033520549

Iron exploration gains momentum

* Cameron England
* From: The Advertiser
* April 05, 2011 12:00AM

WPG Resources is hoping to break ground on the state's third iron ore mine by the middle of this year.

"You will not find any higher grade iron ore in Australia or anywhere in the world," chairman Bob Duffin exclaims, letting a handful of powdery grey/black ore run between his fingers.

We are about one-and-a-half hours' drive southeast of Coober Pedy, standing in an incongruously green landscape the result of the best rain up here for decades. Just in the distance, a small ironstone-capped hill juts out of the landscape.

It is Peculiar Knob one of few landmarks in a flat, treeless expanse, and the inspiration for the name of WPG Resources' proposed iron ore mine.

The only evidence of the project is tens of bags of powdery iron ore the results of drilling at the site.

But if everything goes to plan, the company will be breaking ground on SA's third iron ore mine by the middle of the year.

It is just the start of WPG's South Australian ambitions however. The company is hoping to build at least three projects in the area two iron ore and one coal operating from a central accommodation and management hub.

Peculiar Knob is first cab off the rank. WPG has defined an ore body about 1200m long, starting at just 20m below the surface, which is of sufficient grade to be classed as direct shipping ore (DSO) iron ore that does not have to be upgraded before it is exported.

The company is now waiting on its two final approvals for Peculiar Knob the development application for a facility at Port Pirie where iron ore will be handled, and the Mining and Rehabilitation Plan (MARP) for the mine.

The MARP has been delayed slightly, while the company puts in place a management plan for the thick-billed grass wren a threatened species that is found across much of the state.

WPG expects to hear back about the status of the MARP in May, and the Port Pirie development in July, after which it can get on with building the mine.

First exports are expected just nine months after the company can break ground, with exports of 3.3 million tonnes a year expected. Capital expenditure at the mine and Port Pirie is expected to be $139 million, with another $29 million in working capital needed to strip the overburden off the ore body.

However, the company late last year raised just over $200 million to fund the project, which Mr Duffin says will be a strong cash generator.

WPG is also waiting on another piece of important news in the first half of the year. Its Hawks Nest iron ore project, south of Peculiar Knob, lies within what is know as the Woomera Prohibited Area long a cause for friction between the mining sector and Defence.

In 2009 a Chinese investment at Hawks' Nest worth $45 million was blocked by the Department of Defence, while the full takeover of OZ Minerals was also blocked on national security grounds because its Prominent Hill mine was within the WPA. Prominent Hill was retained by OZ, with the rest of its assets were sold to the Chinese.

WPG is now waiting on a response from the Federal Government to a review, led by Dr Allan Hawke, into how mining and defence can coexist in the area. The WPA is highly prospective for minerals, with Geoscience Australia estimating it contains 62 per cent of Australia's known copper resources and 78 per cent of known uranium resources, but Defence is concerned about its ability to conduct sometimes sensitive weapons testing in the region.

The review advocates breaking the WPA, which already contains three mines including Olympic Dam, into three zones.

One small "core zone" would be entirely off limits, while access to the other two, less sensitive zones would be based on clear, publicly available guidelines.

Mr Duffin is confident that mining will be allowed in much of the WPA, although part or full Chinese ownership will still be frowned upon. WPG hopes to commit to project development at Hawks Nest by 2015.

The scale of that project is larger than Peculiar Knob, with exports of 6-10 million tonnes a year from 2016-17 envisaged.

As if that wasn't enough, the company is also looking to prove up a coal resource to the southwest of Coober Pedy.

The company is aiming to establish a 200 million tonne coal resource at the Penrhyn project, where it hopes to mine coal for domestic power use or export, with the coal upgraded using clean coal technology.