IOH project to cost $744m

Iron Ore Holdings’ Buckland project has been deemed technically and commercially viable following the completion of a feasibility study at a cost of about $30 million.

The study was conducted by IOH management, with the support of technical and commercial companies Sinclair Knight Merz, Snowden, ANZ Banking Group and law firm Gilbert + Tobin.

The project is estimated to have an initial capital cost of about $744 million, with a further $133 million of deferred capital costs after production commences.

The 'C1' operating cost for the project has been estimated at $48.40 per tonne, excluding royalties.

“IOH’s key focus will now be on advancing equity and debt funding solutions, exploring the opportunities for further project upside and then making a final decision on developing this independent mine to ship supply chain solution,” IOH managing director Alwyn Vorster said.

A major focus for the company will be signing up a joint venture to help share the cost of development.

The Buckland project will include a new mine located at the Bungaroo South iron ore deposit, where a JORC ore reserve of 134 million tonnes will support 8mtpa production for more than 15 years.

A 196 kilometre sealed haul road will be constructed from the mine to a new IOH managed transhipping port at Cape Preston East on the north-western Pilbara coast.

Buckland is estimated to have a new present value of about $990 million before tax, a pre-tax internal rate of return of 24 per cent and an average annual EBITDA of about $260 million.

It is estimated that more than $1 billion will be paid in state royalties during the life of the project.

IOH said there is potential to further improve the project, including value engineering studies to optimise capital and operating cost estimates, the development of Buckland satellite deposits, tolling of third parties on IOH haul roads and port facilities, and the purchase of ore on a mine gate basis.

Subject to obtaining funding, IOH said construction could start in the fourth quarter of 2014, with a potential production start in the third quarter of 2016.

IOH’s share price rose by 2.35 per cent to 8.7 cents at 12:30pm WST.