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From mining news, still very skeptical about getting access to the ports and it seems to me that the project is no longer fully funded

CAZALY Resources is investigating a staged development of its Parker Range iron ore project in the Yilgarn utilising the Fremantle and then Esperance ports after it was squeezed out of its preferred Kwinana port option by rival Mineral Resources.

The iron ore junior plans to export ore through Fremantle from March 2012 at an initial rate of 1.4 million tonnes per annum before lifting volumes to 4.6Mtpa some 12 months later by going through Esperance.

It is currently in discussions with both port parties and is also progressing financing options with several potential partners.

The initial start-up rate, which is expected to have a capital cost of $A59.6 million and take 10 months to complete, utilises available capacity within the existing container transport, storage and port infrastructure facilities at Fremantle and will be based on production of direct shipping ore at operating coss of $77 per tonne.

The Esperance port ramp up to 4.6Mtpa, which is forecast to cost a further $104.4 million and take 14 months to complete, will be undertaken using conventional bulk transport and handling methods and will deliver an iron fines product at operating costs of $60/t.

This compares to its original Kwinana export model which delivered an operating cost of $55/t and capital cost of $200 million.

The new phased approach, based on results from the company?s feasibility study, returned a net present value of $372 million and an internal rate of return of 106% with payback expected in 1.83 years.

Cazaly managing director Clive Jones told MiningNews.net that in many ways the revised development was a "blessing in disguise" as it means the group could take advantage of the use of cape size vessels through Esperance.

Technical marketing studies of the Mount Caudan ore at Parker Range indicate the fines will fetch a price aligned with that of the Hamersley fines benchmark price (58% iron grade adjusted on a free on board basis).

Total marketable reserves on the property stand at 30.2Mt at 56.6% iron, 2.1% aluminium oxide, 0.02% phosphorous and 5.9% silica with a loss on ignition rate of 8.9%, with resources of 35.1Mt grading 55.9% iron, 2.8% aluminium, 0.02% phosphorous and 6.4% silica, with a LOI rate of 8.9%.

A life-of-mine stripping ratio of 2.3:1 was calculated based on an initial 8.3 year mine life.

Stage 1 will utilise road train transport from the mine to a new rail head facility at Moorine Rock, a distance of 54 kilometres, but will also require an upgrade to existing roads, construction of a new private road and development of a 3km long rail siding connecting into the Eastern Goldfields Railway line.

Stage 2 will involve an expansion of the rail terminal at Moorine Rock to a 5.5km long balloon loop to connect to an additional track at Esperance which is being developed as part of the state government?s $A120 million access corridor upgrade in the region, which includes a new multi-user iron ore export facility.

Separately, private funding is set to bankroll two 10Mtpa upgrades at Esperance, which are at this stage are targeting a completion date in two years.

Both ministerial and environmental approvals are pending, but Cazaly is hoping to start construction by the third quarter of this year.

In its favour, the proposed project area is already covered by an existing granted mining lease with Cazaly holding the necessary iron ore mining rights, with no native title claims.

Shares in Cazaly were unchanged in morning trade on 35c.