Mid West resources player Murchison Metals Ltd has released its feasibility study on the infrastructure options for the region, rejecting the southern rail route in favour of a northern railway as its preferred option.
Mid West resources player Murchison Metals Ltd has released its feasibility study on the infrastructure options for the region, rejecting the southern rail route in favour of a northern railway as its preferred option.
The decision further complicates the behind-the-scenes manoeuvring by all the region's players over just where the rail and port system will go and who will get to build-own or operate it.
Below is the full Murchison announcement:
Murchison Metals Limited is pleased to announce the outcome of the assessment of rail infrastructure options as part of the Northern Infrastructure Feasibility Study being completed in conjunction with Midwest Corporation.
This study forms part of Murchison's overall feasibility study for the Stage 2 development of the Jack Hills Project.
The rail option assessment concluded that a northern rail route was clearly the best choice, using a comprehensive range of economic, social, environmental, operational and efficiency criteria.
By comparison, an alternative southern rail route was found to be unsuitable when analysed using the same criteria. The alternative route would require additional capital and operational costs of more than $1 billion over the first 5 years of the project's life.
Murchison's Executive Chairman, Paul Kopejtka, said he was pleased the study undertaken by consulting engineers Maunsell Australia, had provided a very clear direction to Murchison for the development of its Jack Hills Stage 2 Project and the crucial Mid West infrastructure required to support it.
"Jack Hills is a world class project, but it is vital the associated infrastructure is fit for purpose, cost effective and tightly controlled, in order to ensure the project economics are optimised," said Mr Kopejtka.
"This study indicates unequivocally that a northern rail route is the only viable option for Murchison Metals and Midwest Corporation.
"Consequently, our final infrastructure proposal for the project will embrace a northern rail route option."
Mr Kopejtka said Murchison continued to work with Midwest Corporation on further development of the Northern Infrastructure Feasibility Study. In addition, each company is working with their consortium partners, on the funding, construction and operation of the rail and port infrastructure.
As part of the Northern Infrastructure Feasibility Study, Maunsell has recommended a northern route as less expensive and more suitable in terms of planned shipment volumes, length of the line, horizontal and vertical alignment and location of the Oakajee port site.
"This analysis shows that the so-called spinal rail solution that utilises the existing narrow gauge rail corridor from Geraldton to Pindar is just not economically viable for the large tonnage northern corridor projects at Jacks Hills and Weld Range," he said.
"Furthermore, the access between Geraldton and Mullewa would involve substantial rock cuttings and would need to avoid interfering during construction with the existing narrow gauge line. It is simply not practical nor economic to construct this railway."
Rail Infrastructure Study Background
Jack Hills is located 380km north east of the port city of Geraldton. Mining at the 1.5 mtpa Jack Hills Stage 1 operation commenced in September this year, with first shipments from Geraldton expected within weeks.
Ore from the initial Stage 1 project is being transported from mine to port by road, using haulage contractors Mitchell Corporation.
The Stage 2 project at Jack Hills - currently under feasibility study and targeting production of up to 25 mtpa - and Midwest Corporation's Weld Range Project will require rail infrastructure for ore transportation to a new deep water port at Oakajee, for export to overseas customers.
Given the absence of rail infrastructure in the region north east of Geraldton, Murchison Metals and Midwest Corporation decided to work together as part of the Northern Infrastructure Feasibility Study. Maunsell Australia was initially engaged in late 2004 by Murchison Metals to complete a pre feasibility study into the Jack Hills Stage 2 mine and associated infrastructure. Maunsell Australia is continuing with the necessary infrastructure engineering, design and feasibility work.
The assessment of rail infrastructure by Maunsell is a key part of the Jack Hills Stage 2 Project and must support its economic viability, as well as the Weld Range Project operated by Midwest Corporation.
The findings of the Northern Infrastructure Feasibility Study are being discussed with the WA Government. The WA Government has expressed its support for the development of rail and port infrastructure in the Mid West.
Murchison has previously announced the formation of an infrastructure consortium with POSCO, Mitsubishi and Toll. The intention is for this consortium to present an infrastructure proposal to build, own and operate the new railway and port.
Murchison believes its consortium will deliver a compelling and financially robust infrastructure proposal, but is open to alternatives from other potential proponents.
The construction of such significant infrastructure will require the resources of substantial organisations, with a proven track record of significant investment in Australia and the ability to both fund and operate the infrastructure.
The Maunsell rail assessment studied two alternative routes for the rail link between Jack Hills and Weld Range and the proposed port at Oakajee.
These can be loosely described as a northern route and a southern route.
The northern route (Alternative 1 in the above figure) option involves a 440km direct standard gauge rail link running in a south westerly direction from Jack Hills and Weld Range to the proposed new port at Oakajee.
The northern route does not link with the existing narrow gauge rail route between Mullewa and Geraldton, which is located further to the south and is currently used for transporting ore from Mt Gibson's Tallering Peak project.
The southern route (Alternative 2 on the above figure) option involves a much longer 683km line that initially heads east from the Jack Hills, before arcing south to the Weld Range project and then travelling south and west to join the existing rail corridor, adjacent to the narrow gauge line at Pindar. The line then travels west to Geraldton before heading north to Oakajee. This provided the most direct southern route from the Oakajee port to the Weld Range and Jack Hills mines, taking into account topography and other access limitations.
The southern option studied by Maunsell considered two different rail gauges - standard and narrow gauge, both requiring duplicated rail between Pindar and Geraldton.
In addition to the enormous construction problems presented by deep rock cuttings, upgrading of the existing narrow gauge railway is not believed to be possible without unacceptable interference with existing operations. Narrow gauge also has unacceptable limitations in terms of axle load, operating efficiency and hence cost.
With both assessed routes, Murchison has worked closely with the Radio Astronomy Park (RAP) and the Square Kilometre Array (SKA) radio telescope project consortium to ensure its current infrastructure proposal takes full account of the future facilities and projects planned for a location between Jack Hills and Weld Range.
An international consortium is proposing the WA location in a bid for the preferred site for the SKA project. The decision on the site location for the project will be made by an international scientific panel in 2008. Murchison and Midwest Corporation are of the view that both projects can and should proceed and that together they have the opportunity to provide substantial benefits to the Mid West region and the wider community of Western Australia.
Rail Route Economics
The Maunsell study shows clearly a northern route is the only viable alternative for the northern corridor iron ore projects.
A northern rail route has an estimated line capital cost of $530 million, which compares favourably with the southern route capital cost of $1.1 billion. Line distance and substantial construction challenges account for a substantial portion of the adverse cost differential of the southern route.
Additionally, the cost of locomotives and rolling stock for a standard gauge line would cost sixty percent more on a southern route, as compared to the preferred northern route from Jack Hills and Weld Range to Oakajee.
Operational costs are also projected to be significantly lower for a northern route due to the significantly shorter travel time.
Further, cost savings flow from lower repairs and maintenance costs as well as fuel costs due to the more favourable topographical profile of the northern route.
Next Steps
The completed rail assessment has enabled Murchison and Midwest Corporation to advance the Northern Infrastructure Feasibility Study with a clear understanding of the benefits of the transport route compared with the southern transport route.
Both companies are continuing to work on the Northern Infrastructure Feasibility Study incorporating engineering design, operating and capital cost estimates, environmental and heritage studies and land acquisition, in conjunction with their individual mine development studies.
Murchison and Midwest Corporation are continuing to develop their separate consortiums, in order to facilitate the investment required for the construction and operation of the rail and port infrastructure.
