Murchison to expand iron mine further

Murchison Metals-backed iron ore miner Crosslands Resources has significantly boosted the proposed scale of its Jack Hills iron ore development north-west of Meekatharra in the Mid West.

In a project update today, Crosslands said it was now targeting annual production of up to 35 million tonnes a year of high grade iron ore and concentrate from its proposed expansion of the Jack Hills mine, reflecting the significant growth of the orebody to more than 1 billion tonnes.

Originally envisaged as a 20-25mtpa producer of conventional high grade direct shipping ore (DSO), the Jack Hills development plan has fundamentally changed as drilling has increased understanding of the geology. The deposit is now recognised as a large scale magnetite orebody containing high grade lenses of conventional hematite.

Magnetite typically contains about half the iron of conventional hematite, and requires crushing, grinding and magnetic separation to recover the iron. However the final product is extremely high grade and fetches a premium price to conventional ore. It is especially prized by Asian steel mills as it requires less energy to produce steel.

Consequently, Crosslands is proposing parallel production circuits to produce up to 10mtpa of high grade hematite ore, and up to 25mtpa of concentrate from lower grade magnetite and transitional hematite mineralisation. The existing 1.5mtpa Jack Hills Stage 1 mine has been in production since late 2006.

Bankable feasibility studies for the Jack Hills expansion are on track for completion next year, with first production slated for late 2013, early 2014.

At its proposed scale, Jack Hills alone would be sufficient to underpin development of the $4 billion Oakajee deepwater port and rail project being developed by Crosslands' stablemate Oakajee Port & Rail. Crosslands and OPR are each owned 50:50 by Murchison and Japan's Mitsubishi Corporation.

Speaking at Murchison's annual general meeting today, executive chairman Paul Kopejtka said Jack Hills was fast becoming the largest potential iron ore exporter in the Mid West, likening it in scale to some of the biggest projects being developed in Brazil and the Pilbara.

Furthermore, he said Crosslands expected the resource to increase by between 400 million and 1 billion tonnes when an updated resource estimate is released next month.

Mr Kopejtka told shareholders that Murchison's twin investments in Crosslands and OPR made it the most strategic player in the Mid West, especially as the development of Oakajee was critical if other companies in the region were to generate any value from their proposed mine developments. Mr Kopejtka noted that Chinese companies alone had already invested $2.5 billion in the Mid West iron ore sector.

Also speaking at the Murchison meeting, acting OPR chief executive Alwyn Forster said OPR had already been in discussions with 14 potential users of the Oakajee port and rail infrastructure, including Crosslands, Sinosteel and Gindalbie Metals offshoot Karara Mining.

Mr Forster said those three companies were likely to become Oakajee's foundation customers, however formal agreements could not be concluded until they had demonstrated the bankability of their respective projects, most likely in the second half of next year.

Predicting that iron ore demand would remain "stronger for longer" despite last year's short term fall, Mr Forster said he believed customer demand would require a more rapid than originally expected expansion of Oakajee's capacity. That expansion could be needed almost from start-up, he said.

Murchison shareholders passed all motions at the meeting, despite opposition from the Australian Shareholders Association and some institutional shareholders over the issue of options to new non-executive Rod Baxter. Proxies only narrowly supported the options package, with 120.4 million proxies lodged in favour of the package and 103.1 million proxies against.