Gindalbie unveils Karara BFS and eyes further expansion plans
Kate Hayc ock Monday, 3 September 2007
THE bankable feasibility study into its $1.6 billion Karara magnetite project in Western Australia has confirmed the project's viability for Gindalbie Metals and should earn it some $9 billion in free cash flow over the first 25 years of the mine's life.
Perth-based Gindalbie said today the BFS results confirmed Karara is an economically robust, long-life iron ore project that could have a mine life of 60 years.
The company has already flagged plans to expand the project anywhere up to 30 million tones per annum.
Under the terms of Gindalbie's joint venture with the Chinese Anshan Iron and Steep Group (Ansteel), Karara will have an initial output of 8Mtpa of magnetite and 60 years production; however Gindalbie said today Ansteel would like to see production from Karara increase to meet its steelmaking requirements in China.
Under the BFS, the concentrate will be transported via rail to Geraldton Port.
Gindalbie said the decision to use rail was a key factor in its expansion plans, as the proposed rail network will provide the project with an ore transport capacity of 30Mtpa.
The project will have an estimated net present value of $2.25 billion and an internal rate of return after tax of 24.6%, the BFS found.
Over the first 25 years of the project, free cash flow after tax from the initial ore reserve would come to $9.33 billion, with an average annual free cash flow of $360 million.
The figures were based on a concentrate price of $111.9/t concentrate and $178.58/t of pellets, Gindalbe said.
The capital expenditure estimates for the project came to $1.7 billion, including contingency, the construction of a Chinese pellet plant by Ansteel and Gindalbe, and all Australian mine site and infrastructure costs.
Operating costs were estimated at $552 million per annum, or around $69 per tonne of concentrate.
The Karara resource was also given a shot in the arm by the BFS and was defined to 1426Mt, including some 655Mt indicated and 771Mt inferred resources, and an initial probable ore reserve of 497Mt which underpins the initial 25-year production.
First ore from the project is expected to be delivered in the first quarter of 2010, with some 4Mtpa of the concentrate heading to the Chinese pellet plant to produce blast furnace pellets.
The remaining 4Mtpa will be sold directly to Ansteel for use in its Sintering operations.
The project will have a waste to ore ratio of 0.42-1.0, with some 20Mtpa mined each year to produce the 8Mt of concentrate.
As part of the Karara joint venture, Ansteel has agreed to provide 75% of the equity funding for the project and underwrite all debt funding, with a debt to equity ration of 70-30%.
The release of the BFS, alongside a 19% increase in indicated and inferred resources at Gindalbie's Mungada hematite project to 27.1Mt at 61.7% iron, gave the Mid-West iron ore hopeful's shares a 10% or 16.5c boost to $1.835.
GBG Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
