Jack Hills not holding Oakajee back: OPR

Oakajee Port & Rail chief John Langoulant has scotched suggestions that delays at the Jack Hills iron ore development are holding back its efforts to develop its namesake $4 billion port and rail venture in the Mid-West.

Murchison Metals, which owns 50 per cent of both Jack Hills and OPR, this month confirmed that final feasibility studies for Oakajee would not be complete by the end of next March, when OPR's exclusive rights to develop the port would fall away if key milestones are not met.

It linked the delays to the need for OPR to finalise foundation customer contracts and a revamp of the Jack Hills development plan following a significant increase in the resource base to over 3 billion tonnes.

Feasibility studies for the Jack Hills mine are now expected to be complete in the second quarter of next year. However, the short delay fuelled already-circulating market rumours about the viability of the big but low-grade iron ore mine.

Murchison also confirmed that completion of Oakajee was subsequently expected to be delayed by at least six months to late 2014.

Murchison and OPR subsequently asked the state government for an extension of the exclusivity period beyond April.

Fearing the potential flow-on impact on the timing of Chinese-backed mines dependent on the port, Premier Colin Barnett then suggested "some modest restructuring" of the Oakajee arrangements may be needed to allow the port to proceed independent of progress at Jack Hills.

But speaking after Murchison's annual meeting today, Mr Langoulant said progress at Jack Hills was not to blame for the delay to Oakajee's timing.

"Jack Hills, notwithstanding all the market rumour and stuff, is not holding this project up," he said.

Instead, construction was actually dependent on the grant of key government approvals, notably heritage approvals, which were not expected until the third quarter of 2011.

In other words, even if bankable feasibility studies were completed for both the mine and port by the end of March, construction of the port and rail project would still not be able to occur until items such as heritage approvals were received, he said.

"If someone could point to us, how faster or quicker we could get under way on the port and rail having abided by all the requirements we've had to ... I'd be pleased to hear it," he said.

Furthermore, he said it would be counter productive to try to "decouple" the development of Oakajee from Jack Hills. OPR and Jack Hills are both owned 50:50 by Murchison and Japanese giant Mitsubishi.

"We actually think the Jack Hills project being associated with the port and rail infrastructure is complimentary and will accelerate the pace of development because the same shareholders are investing in both projects and are keen to get both into operation," Mr Langoulant said.

He said OPR was working with the state government to sign detailed project implementation agreements by the end of March as required under the existing Oakajee state development agreement.

"After that date, (the requirement) is as soon as you possibly can get into construction, you get into construction. The state development agreement does not require us to start at any particular time, it requires us to sign implementation agreements," he said.

"As far as we are concerned, we are doing the best we possibly can to meet the requirements of the state development agreement.

"Our request to the Premier and the state was 'look at those facts so that we can have a smooth process through 2011, rather than everyone just focusing on that end of March date'."

Mr Langoulant said pending receipt of oustanding approvals in the third quarter of 2011, he expected preliminary construction work on the Oakajee port to start as early as the last quartre of next year.

The state and federal governments have each committed $339 million for common user port infrastructure, namely the 2km long breakwater, turning basin and navigation aids.

The port will initially be able to ship over 45 mtpa of ore, from Jack Hills and the Weld Range and Karara mines of fellow foundation users Sinosteel Midwest and Gindalbie Metals.

Murchison chairman Paul Kopejtka re-emphasised Mitsubishi's strong ongoing committment to both Jack Hills and OPR, noting Mitsubishi had spent over $270 million on the projects to date.

He also noted strong customer backing for Jack Hills, which would be the region's single biggest iron ore producer at forecast output of 35 million tonnes a year, with mining vehicle Crosslands Resources having signed letters of intent with customers seeking up to 55 mtpa.

He also noted that iron concentrates from Jack Hills would be among the highest grade, lowest impurity products from WA.