Magnetite miners get royalty rebate

Premier Colin Barnett has used the official opening of the $2.6 billion Karara iron ore project in the Mid West to announce a royalty rebate to support magnetite developments in Western Australia.

Mr Barnett said there were 29 magnetite projects at different stages of planning in WA, though in practice the new policy will apply to just two that have proceeded.

Karara has become the state’s first magnetite producer and is due to be followed later this year by CITIC Pacific’s larger Sino Iron project in the Pilbara.

Mr Barnett told journalists today that Karara, jointly owned by Gindalbie Metals and China’s Ansteel, would pay about $30 million in royalties during its first year of production.

Under the new policy, the project will qualify for a 50 per cent rebate during its first year of operation.

Other magnetite projects will be able to apply for the rebate on a case-by-case basis.

Mr Barnett said the initiative will allow miners to cover the heavy cost of producing the mineral at a quality suitable for export.

Previous hopes of turning the magnetite-rich Mid West into the next Pilbara were dealt blows when the price of iron ore fell and the planned Oakajee port, north of Geraldton, was indefinitely mothballed.

At Karara’s official opening today, Mr Barnett described the joint venture as a great example of the positive impact of Chinese investment.

He said the goverment's rebate policy would apply for the next three years.

It would involve a 50 per cent rebate on royalties paid for the first 12 months of magnetite production on a project-by-project basis, before reverting to a full royalty rate of five per cent in the years after that.

"Bringing magnetite ore to grades suitable for export is capital and energy intensive, so this royalty rebate will assist in recovering the massive investment required to achieve production," Mr Barnett said.

The Karara project is aiming to reach its nameplate capacity of 8 million tonnes of magnetite concentrate by the end of this month.

The magnetite concentrate has a high 68 per cent iron content, after the low grade magnetite ore at Karara (with a 36 per cent iron content) is processed.

In addition, the project includes a substantial 2mtpa hematite mining operation.

Gindalbie’s outgoing chairman George Jones told the official opening that the commissioning of the project marked the realisation of a long-held dream to establish downstream processing and value adding opportunities for the Australian iron ore industry.

“Moving forward, I can tell you that the Karara stage 2 feasibility study is at an advanced stage and is currently under consideration by the board,” he told the official opening.

Stage 2 will double production of magnetite concentrate to 16mtpa, and is designed to utilise power and transport infrastructure that is already established at the mine site and port.

The expansion is expected to cost between $1.5 and $2 billion.

He said a final decision would be considered later this year, after the operators at Karara had achieved sustainable production at the current plant’s nameplate capacity.

The expansion would take a further 2.5 to 3 years to complete, and would use existing capacity at the port of Geraldton.

Mr Barnett said the Karara project was the “first piece of the jigsaw for the Oakajee project”.

He believes the Mid West region could support 40-50mtpa of iron ore production, and this would only be possible if a second port was built at Oakajee north of Geraldton.