Fortescue Metals Group Ltd has announced mining experts Snowden Mining Industry Consultants has completed the mining feasibility study for the first stage of the Pilbara Iron Ore Project covering its Cloud Break and Christmas Creek deposits. Snowden have completed the study which confirms an operation of 45Million tonnes per annum (Mt/a) at a low operating cost over an initial mine life of over 20 years. The Snowden study has established a project mining cash cost of $7.06 per tonne. With processing costs of $0.85/tn and transport costs onto the ship of $4.50/tn, Fortescue's cash costs are a low $12.41/tn. The total cost of production is $16.11/tn after allowing for leasing costs of mining and processing equipment and a contractor's profit margin. This total cost is equivalent to US$11.28 per tonne FOB. Based on a delivered price into Asia, Fortescue's mines will be one of the lowest cost suppliers of iron ore in the world. "This cost profile means that Fortescue would generate a gross margin (EBITDA) of approximately A$30 per tonne based on 2005/06 benchmark prices for Australian exported iron ore." said Fortescue's Chairman Gordon Toll. The associated infrastructure will be ready to handle 45Mta by March 08 with shipping available earlier. The Snowden study shows that Fortescue will be able to reach this annualised rate of 45 Mt/a within the first 15 months of ore production. The report also shows that the project will have an initial mine life of over 20 years based on existing reserves of 1.1 billion tonnes. Fortescue expects to add to its reserve estimate when the results of a current reserve study being conducted by Snowden are released soon. "With the mining and processing equipment leased, and the costs associated with that covered within the EBITDA margin, based on the initial production of 45 Mt/a and current iron prices - we would be looking at annual earnings of some $1.3 billion." Mr Toll added. "Fortescue only needs to repay the infrastructure costs of $1.92 billion as the mines will be entirely financed, depreciated and amortised through leases." "This is a great moment in the development of this project and for the Fortescue Metals Group," said Mr Toll. "Independent verification of our mining program inclusive of operating costs, mine life and ramp up schedule is a major advance". "It is particularly pleasing that the Cloud Break and Christmas Creek deposits, discovered by Fortescue within the last 2 years, have now been formally confirmed as having enormous commercial value. At a time when international demand for iron ore is at record levels, the creation of a new mining operation is an incredible achievement," Mr Toll concluded.
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