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07/03/06
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=DJ INTERVIEW: Australia's Aztec Keeps Koolan Iron Forecasts
By Stephen Bell
Of DOW JONES NEWSWIRES
PERTH (Dow Jones)--Unfazed by an overheated mine construction market, Aztec Resources
Ltd. (AZR.AU), believes that it can meet a tight deadline of late this year for the first
shipments from its A$108 million Koolan Island iron ore project off the coast of Western
Australia.
"It is an aggressive target and that is what we are planning to achieve,"
said Peter Bilbe, managing director of Perth-based Aztec.
"If we have some slippage, we don't expect it to be more than one or two
months," he said in an interview with Dow Jones Newswires.
One of several small Australian companies scrambling to capitalize on current high iron
ore prices, Aztec aims to start production at a rate of two million metric tons per
annum.
It hopes to build up to four million tons in the third year of operations at Koolan, a
former BHP Billiton (BHP.AU) mine that was closed in 1993. The ramp-up schedule calls for
construction of a "sea-wall" by Aztec that will prevent water from the Indian
Ocean flooding into Koolan's main pit.
Bilbe said that Aztec expects to receive final approvals from the Western Australian
government late this month, allowing construction to begin late April.
Project costs have risen sharply in Western Australia over the past few years because
of soaring labour and materials charges amid a China-driven mining boom. But Aztec
remains "comfortable" with its capital cost forecast, Bilbe said.
"We're not immune to market forces, no-one is at the end of the day," he
said. "But there is no indication at this stage that there is going to be a major
blowout in our capital costs."
The biggest individual component is a A$20 million jetty that will cater for
Panamax-sized ships, each capable of hauling around 165,000 metric tons of iron ore to
Asian steel mills.
Aztec had A$54 million in cash as of January 24, following a share rights issue and is
looking at several alternatives to fund the remaining cost, including underwriting the
exercise of July 2006 options to raise A$42.3 million.
U.K.-based Cambrian Mining plc (CBM.LN) owns 28.6% of Aztec. The next biggest
shareholder, JP Morgan Chase, has 6.1%.
Aztec has preliminary agreements to sell around four million metric tons per year of
iron ore to a mix of customers, Bilbe said. The buyers include Marubeni Corp., Sumitomo
and Mitsubishi of Japan, and Citic, China Metals and Sinom of China.
Aztec expects to convert the deals into firm sales contracts "within the next two
months", he said, with the contracts to be linked to annual benchmark iron ore
prices.
Analysts predict that iron ore prices will rise a further 15% to 20% in the Japanese
fiscal year starting April 1, despite the current stalemate in annual price-setting
negotiations. Prices soared 71.5% for the 2005/06 year.
The third round of talks between steelmakers in China and Japan and the main suppliers
BHP Billiton, Rio Tinto Plc. (RT) and CVRD (RIO) - ended on February 23 with "no
material progress made", Macquarie Equities said in a research note.
-By Stephen Bell, Dow Jones Newswires; 61-8-9245-6408; [email protected]
-Edited by Ian Pemberton
(END) Dow Jones Newswires
March 05, 2006 23:33 ET (04:33 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.
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