Brockman Pilbara project to cost $1.35bn

Brockman Resources plans to start production at its Pilbara iron ore project by the end of 2012 after a study estimated capital costs at up to $1.35 billion.

The Nedlands-based company said today it will move to the definitive feasibility study following the positive outcome of a prefeasibility study over its Marillana iron ore project.

The study was based on the production of 17 million tonnes of beneficiated iron ore fines each year over a minimum mine life of 20 years.

It also investigated four alternative development options, using a combination of BHP Billito's rail line, Fortescue Metals Group rail and port infrastructure and the North West Iron Ore Alliance infrastructure.

Brockman said there were two primary options for rail haulage; either the construction of a rail loading loop on the Marillana site connected to the BHP rail line or the construction of a 110 kilometre spur line connected to FMG's rail infrastructure at it Chichester project.

"Brockman is actively pursuing access to appropriate rail services," the company said.

The study also found the project's net present value to be between $1.4 billion to $1.64 billion using an 8 per cent real discount rate, with an internal rate of return ranging from 19.5 per cent to 25.1 per cent.

Capital costs have been pegged at between $705 million and $1.35 billion, depending on different logistical, development and ore transportation options, the company said.

Capital pay back is forecast to range from five to six years.

Total operating costs are projected to range from $31.50 to $34.80 a tonne on a free on board basis and excluding state royalties.

Brockman managing director Wayne Richards said the initial scoping and tender preparation will start later this quarter and the definitive feasibility study is expected to be wrapped up in the third quarter of 2010.

Production has been slated to start in the fourth quarter of 2012.

Shares in Brockman shed 2.5 cents to $1.275 at 11:43 AEST.