Capital costs for Grange Resources Ltd’s dual Southdown iron ore project near Albany and Kemaman iron ore pellet operation in Malaysian have blown out from about $1 billion to more than $1.5 billion.
Capital costs for Grange Resources Ltd’s dual Southdown iron ore project near Albany and Kemaman iron ore pellet operation in Malaysian have blown out from about $1 billion to more than $1.5 billion.
Capital costs for Grange Resources Ltd’s dual Southdown iron ore project near Albany and Kemaman iron ore pellet operation in Malaysian have blown out from about $1 billion to more than $1.5 billion.
And costs for the project, due to go into production in 2008, could go even higher.
Grange company secretary Mark Smith told WA Business News the price hike was “consistent with cost increases throughout the resources sector” and was identified during the current bankable feasibility study, due for completion by the end of March.
The latest estimates for the total Southdown-Kemaman project were forecast at $US1.15 billion ($A1.56 billion) and described as “preliminary capital cost estimates”.
However, a further review and optimisation of the preliminary capital and operating costs is under way.
Most of the price increase was on the construction side of the project.
Grange is the latest in a long line of resources companies to report major project blow outs due to skyrocketing construction, equipment and manpower costs.
The estimate also took into account the cost for the further expected expansion of the Kemaman site.
Completion of the bankable feasibility study will allow Grange to pursue joint venture partners for the project, a favourite for which has to be Rio Tinto.
Grange has six kilometres of a resource which has a strike length of about 13km, the balance held by Rio. The possible scenario would be for the entire resource to be developed to extend the project life out to about 35 years.
Grange managing director Geoff Wedlock said the company would be happy retaining about 30 per cent of the final project.
Grange is planning to mine 17.8 million tonnes a year year to produce 6.6mt/year of magnetite concentrate over 23 years from its Southdown project, 90km north-east of Albany, beginning in 2008.
The project calls for the concentrate to be pumped through a slurry pipeline to the port of Albany, then shipped to the Kemaman iron ore pellet facility, due to come on stream in June 2009 and building quickly to 6.8mt/year.
Key advantages for Grange’s Malaysian operation are its location and estimated landed operating costs for iron ore pellets of just $US44 a tonne ($A59.50/t), less than half the 2005 landed cost of blast furnace pellets from Brazil to Asian buyers at $US94/t ($A1.27/t), with spot prices even higher.