Crunch time looms for infrastructure

The end of the decade is looming as the deadline for billions of dollars worth of infrastructure to be in place if the Mid-West region, centred on Geraldton, is to claim its place as Australia’s second largest iron ore province.

By then the region could be producing up to 60 million tonnes of iron ore and carbon steel-related minerals and products a year, with up to 10 per cent of it in the form of value-added products, such as pellets.

And 2010 is when the two biggest iron ore projects in the region are planned to come on stream.

Both will be looking for an open access deepwater port at Oakajee, 23 kilometres north of Geraldton, fed by a near 400km rail link from Murchison Metals Ltd’s Jack Hills project and Midwest Corp Ltd’s Weld Range project, about 380km and 350km respectively north-east of Geraldton.

Midwest will ship the first ore from its one million tonnes per year, seven-year Koolanooka hematite project, 150km east of Geraldton, later this month.

But the main game is the planned joint development of its $1 billion Weld Range hematite project and its Koolanooka magnetite concentrate/ pellet project, with China’s largest iron ore importer Sinosteel Corp.

The target is 15-20mt/year over 15 years from Weld Range and about 5mt/year of concentrates/pellets from Koolanooka, by the end of the decade.

Murchison has already begun construction of a $24 million starter project at its Jack Hills Project, which is scheduled to begin trucking at 1.2mt/year in June this year.

The company has also secured the backing of South Korean steel major and 4 per cent shareholder, POSCO Ltd, for a stage-2 development targeting 25mt/year from mid 2010.

These two major projects fall into the Mid-West region’s northern corridor, north of a line drawn roughly east from Geraldton, where there is virtually no existing infrastructure, apart from road.

Preliminary Murchison cost estimates for just the rail and Oakajee port facilities for Jack Hills-2 are between $1.1 billion and $1.3 billion. However, these numbers are expected to rise considerably with the addition of ancillary works and power requirements to be identified in a bankable feasibility study due by the end of this year, ahead of construction beginning early 2008.

Midwest is doing a similar evaluation with Sinosteel and several infrastructure investors/developers and funders.

In the face of the booming China-fuelled iron ore trade that shows no signs of slowing, Geraldton Port will soon be at capacity, despite the recent $35 million upgrade of Berth-5 as a dedicated iron ore berth expected to be ready in the third quarter 2007.

Current iron ore exports through Geraldton Port are about 2.5mt/year, but the authority says this could rise as high as 21mt/year within five to 10 years, with the port only able to take ships of up to 65,000 tonnes, compared with the 150,000t-plus ships envisaged for Oakajee.

Mount Gibson Iron Ltd has proposed development of a dedicated magnetite facility at Berth-7 to service its upcoming needs, but this has yet to get a green light.

Planning and Infrastructure Minister Alannah MacTiernan has conceded Geraldton Port will soon be swamped, and both she and Premier Alan Carpenter have given Oakajee guarded support as the iron ore sales deals stack up.

Possible options for the Oakajee port and rail network include construction by a consortium associated with one of the iron ore producers, probably Murchison or Midwest, construction by a specialist engineer/infrastructure provider, and funding from the state government, which is unlikely.

While the northern corridor remains bereft of infrastructure, the southern corridor is pretty well provided for with rail, road and power, albeit in need of some upgrading, particularly the narrow gauge rail system dating back to the 1920s and only able to carry 40t wagons.

Gindalbie Metals Ltd expects to begin direct shipping of 1.5mt/year of hematite from its $720 million Karara dual iron ore project, 200km east of Geraldton, in mid 2007 using existing haul road, rail and port infrastructure. Production is scheduled to rise to 4mt/year by 2009.

The company will become the third in the region to add to the Oakajee pressure when its 4mt/year iron pellet plant goes into production in 2010.

The current 400mt resource is expected to be doubled by mid 2006, giving the company a 7mt/year pellet production option, the ore being fed to the plant near Geraldton via a 200km slurry pipeline.

Tallering Peak miner Mt Gibson’s second stage involves the $620 million development of its 5mt/year Extension Hill mine, 330km south-east of Geraldton, with China’s fourth largest steelmaker Shougang Group.

The partners plan to double production to 10mt/year from 2009-10 following commissioning around late 2007.

Geraldton Iron Ore Alliance founder and Gindalbie managing director, David McSweeney, told WA Business News it was important not to repeat the mistakes of the Pilbara, a reference to the closed infrastructure facilities in the world’s second largest iron ore province and a view supported by Ms MacTiernan.

“But its low-cost operations and other business practices should be combined with the Mid-West’s own particular circumstances and the individual requirements of its aspiring producers to ensure there are no stranded deposits in the region,” he said.

The alliance was formed a couple of months ago to facilitate the orderly development of multiple-user infrastructure in the region and is headed by independent chairman and former WA state development minister, Clive Brown.