Ferrowest doubles scope of iron study

Belmont-based Ferrowest Ltd has doubled the scope of the engineering study into its Yalgoo iron project to one million tonnes per annum on the back of high demand for merchant pig iron.

The company said the increased capacity is expected to result in further capital and operating cost savings per tonne of merchant pig iron by about 20 per cent however capital cost would increase from $437 million to $700 million.

On current sale prices, the 1Mtpa operation would generate annual revenue of around $836 million.

The company is currently in discussions with four parties over off-take and investment agreements.

"The proposal to increase initial production to 1mpta has largely come about by the demand from these potential customers and the company is aiming to finalise agreements with one or more of these groups in the near future," Ferrowest said.

"The Company expects to secure the funding it needs to complete the feasibility studies for the Project from these arrangements.

"It is also possible that some of these groups will participate in the project financing solution for the capital to build the project that is scheduled to be arranged in mid 2009."

Meanwhile the company has altered the terms of a $3 million convertible note raising, launched in March, which remains partially completed due to poor market conditions.

Ferrowest will issue one free option, with an exercise price of 60 cents and an expiry date of June 2010, with each convertible note.

"Coupon interest payable under the convertible notes will, at the noteholder's option, be payable to the noteholder in cash or in shares issued at a 15% discount to the VWAP of Ferrowest shares when the interest falls due," the company said.

In March the company planned to raise $3 million with the issue of ip to 7.5 million convertible notes priced at 40c each.