A study has valued Australasian Resources Ltd's share of the Balmoral South iron ore project in the Pilbara at $3 billion, highlighting the economic viability of the operation that has a 28 year mine life.
A study has valued Australasian Resources Ltd's share of the Balmoral South iron ore project in the Pilbara at $3 billion, highlighting the economic viability of the operation that has a 28 year mine life.
The completion of the bankable feasibility study showed the project has an overall net present value of $5 billion and an internal rate of return of 20.8 per cent.
The study was based on a 12 million tonne per annum operation which includes the production of 7Mtpa of iron pellets. Capital cost is projected at $2.7 billion, excluding owner's cost and contingency.
Project partner, Chinese steel producer Shougang Holdings Ltd, can now elect to earn a 50 per cent interest in the project after reviewing the study.
The Chinese company can earn that interest by providing 100 per cent of the project funding, securing an offtake agreement for all iron production and constructing the project or guaranteeing the development by another constructor.
"We will now work with our partner Shougang to ensure that financing for the project is secured within
the next three months and look forward to progressing the project to first production in January 2012," Australaisan managing director Andrew Caruso said.
A copy of the announcement is below:
A 2011 commissioning for Australasian Resources' (ASX: ARH) Balmoral South Iron Ore Project in the Pilbara Region of Western Australia is planned with a recently completed Bankable Feasibility Study (BFS) confirming the project has robust economics and will deliver to ARH shareholders an NPV of A$3B based on projected cash flows for the company for the 28 year life of the project (includes 3yrs of construction).
Forecast cash flows are based on ARH receiving 50% of free cash flow under the proposed funding model with Shougang and are based on constant prices forecast for concentrate and pellets from 2009.
Shougang can elect to earn a 50% interest in the Project by:
_ Providing 100% of the Project funding through an interest free project loan (Finance Offer);
_ Guaranteeing the purchase of 100% of iron ore products from the Project; and
_ Constructing the Project or guaranteeing the construction by another suitable constructor.
The completion of the BFS provides the basis for partner Shougang Holdings (Hong Kong) Limited to finalise its investment decision.
International Minerals Pty Ltd will issue a Feasibility Notice to Shougang on or before 20 June 2008 and as a consequence will provide Shougang with a period of three months to finalise its Finance Offer.
Australasian Resources Managing Director, Andrew Caruso, said; "The completion of the Feasibility Study represents a critical milestone towards our aspiration to be a significant, sustainable and profitable producer of quality iron ore products.
"This study highlights the robust economics of the project and the significant benefit it will provide to Australasian and its shareholders for many years to come".
The BFS for the proposed 12Mtpa project (including 7 Mtpa of pellets), shows a real after tax net present value (NPV) of A$5,075M and an internal rate of return of 20.8%.
Based on the proposed Shougang funding model, Australasian Resources can expect a real after tax NPV (50% of the total free cash flow) of A$3,010M.
The capital cost of the project is A$2.7B (excluding owner's costs and contingency).
"We will now work with our partner Shougang to ensure that financing for the project is secured within the next three months and look forward to progressing the project to first production in January 2012," Mr Caruso added.
"There is also significant scope to enhance the Project based on Shougang's extensive experience in magnetite mining, processing and plant construction."
