FMG moves on Pilbara ore

After falling victim to the doomsayers, having its share price halved and slipping off the radar for a few months, Andrew Forrest’s Fortescue Metals Group and its ambitious $2.3 billion Pilbara iron ore project appear to be back on track.

After questions over its resources, infrastructure costs and failure to secure a big, probably Chinese, partner, Fortescue’s share price plunged from about $5.50 in mid March this year to $2.30 in early June. Since then, however, the share price has nearly doubled to $4.50 early this week.

And it has all happened in a very quiet, very un-Fortescue way, with the company telling WA Business News it is on track to make its first iron ore shipment in late 2007 for first stage production of 45 million tonnes a year (mtpa), rising to 60mtpa at some unspecified time in the future.

Fortescue said it was unaware of the reason for the price spike, but confirmed it had been talking to a number of interested parties about the project, including the giant Chinese steel company Sino Steel, so far without conclusion.

The company recently announced a high-grade resource update, environmental approvals for Stage A of its development south of Port Hedland, and signed an access agreement with the principal Aboriginal group in the area.

Resources at Cloud Break, Christmas Creek and Mt Lewin rose from the previous 2.3 billion tonnes to 2.4bt, with the all-important high-grade 60.4 per cent iron component up from 806 million tonnes to 811mt.

It is the high grade that Fortescue is after, the grade company resource strategy head Dr John Clout considers acceptable to the market without the need for further processing.

Fortescue is continuing an extensive infill-drilling program at both Cloud Break and Christmas Creek, and expects to have its mine feasibility study, which will include a final reserves position, completed before the end of the year.

Executive director Graeme Rowley said he expected the reserves position to be made in three separate announcements as the information came to hand.

“I would hope the first of these announcements will be in early November and the final one before December,” he told WA Business News.

An important part of this will be lifting current reserves into the critical 60 per cent plus high-grade level. However, Mr Rowley said indications were that “the resource is such that it moves into the [higher] measured category quite comfortably.

 “The infrastructure feasibility has been completed and we hope to conclude all the operating and capital costs by the middle of December at the latest,” he said.

The company has also received environmental approvals for Stage A of the project, which includes the proposed port facilities at Anderson Point, near Port Hedland, and the 255 kilometre rail line connecting the project to the port.

The $1.95 billion infrastructure and development bill includes $800 million for the creation of a two-berth port to handle ships up to 250,000t, $560 million for a rail link capable of taking four train sets (each of two locomotives and 200 wagons), $120 million for a mine handling facility and $470 million of indirect costs.

The access agreement with the Nyiyaparli people covers about 80 per cent of Fortescue’s current resource base and includes all of the Christmas Creek and Mt Lewin deposits, and about 50 per cent of Cloud Break.

The company said it was now waiting for environmental approval for the next stage of development, including a rail spur and for the mining areas.