Flinders mine costed at $3.65bn

Flinders Mines says it has identified a viable mine plan for its Pilbara iron ore project (PIOP), ahead of a crucial shareholder meeting to approve a joint venture with infrastructure company BBI Group.

A scoping study released today by Flinders estimated the total capital costs of the mine to be around $3.65 billion.

Flinders entered into a non-binding agreement with BBI in November to develop the PIOP, located about 300 kilometres from the Pilbara coast, where BBI plans to build a new port.

The scoping study was based on an indicative production target of 615 dry metric tonnes over the mine's life, or 45 million dry metric tonnes per annum.

The study assessed the mining potential using measured, indicated and inferred mineral resources of 1.48 billion tonnes, as announced in March 2018.

The resource has an average grade of 52.2 per cent iron.

Flinders said it would beneficiate low-grade material to achieve an assumed life-of-mine grade of greater than 60 per cent iron.

Flinders and BBI will form the joint venture PIOP Mine Co to develop the mine, which will rely on the new port and rail line to be built by BBI.

PIOP Mine Co will become a foundation customer for the BBI infrastructure project under a long-term services agreement, providing an infrastructure solution for the PIOP development.

BBI will also be responsible for developing a feasibility study for the PIOP and managing the end-to-end development of the mine.

It will also arrange the necessary debt and equity funding.

Flinders said today the funding would come substantially from Chinese state-owned enterprises and China-based banks.

Flinders chairman Neil Warburton said the finalised transaction agreements were ready for the upcoming EGM shareholder vote, expected next month.

Shareholders had previously raised concerns over the agreement, saying they were not provided with enough details of the proposed deal.

“The company believes it now has a reasonable basis for all of its assumptions including finance, development, infrastructure and marketing, and is the next step in bringing the PIOP into potential production,” Mr Warburton said.

New Zealand-based Todd Corporation holds a 56 per cent stake in Flinders and a 90 per cent stake in BBI, and will contribute a $5 million loan and a further $6 million rights issue for capital as part of the agreement.

Flinders said the success of the project would depend on securing a viable rail and port solution, iron ore pricing, and ongoing metallurgical and process plant engineering development.

“The scoping study and indicative production target are to inform Flinders’ shareholders about the potential outcomes that could arise from the proposed transaction with BBI Group,” Flinders said.