Oakajee project to cost $4.37bn

The cost of the Oakajee port and rail project in the Mid West has increased to $4.37 billion after high demand from miners raised the initial capacity at the port by almost 30 per cent.

Oakajee Port and Rail today delivered the draft bankable feasibility study for the project, which had an earlier estimated capital cost of about $4 billion.

The new project capital cost estimate includes a contingency of $403 million and has an accuracy range of plus and minus 15 per cent.

The study was delivered to the state government, which along with the federal government, will contribute a combined $678 million towards the project.

The project comprises of a standard gauge, heavy haul 546km rail line extending from the Jack Hills iron project through to the Oakajee port site, north of Geraldton, with rail spurs for foundation customers to connect to the line.

The rail line will connect miners to a 45 million tonne per annum port facility where two cape-size berths will be constructed as part of the initial configuration.

OPR had originally planned to have an initial 35mtpa capacity at the port, however increased the amount to accommodate the high demand from miners.

Earlier this month Sinosteel Midwest, Gindalbie Metals and Crosslands Resources - a joint venture between Murchison Metals and Mitsubishi - were selected as potential foundation customers of the port.

OPR today reiterated that the port will be capable of expansion as demand for capacity increases.

"The positive findings of the studies, coupled with strong interest from regional miners in utilizing the new port and rail supply chain, strengthen the business case and our confidence in the technical feasibility of this complex infrastructure task," OPR chief executive John Langoulant said.

"The current major areas of activity include further engineering studies and progressing our approvals program together with negotiation of supply chain agreements with our potential foundation customers .... which we expect to complete later this year.

"By clarifying the tonnage, timing and technical requirements of foundation customers, we will then be in a better position to assess the commercial feasibility of the project targeted for completion by the end of the year."

Murchison, which owns 50 per cent of OPR, today said the draft BFS will be used to advance discussions with potential financiers and to assist in determining early long lead procurement strategies.

The project is expected to come online in early 2014.

OPR's announcement is below:

Oakajee Port and Rail (OPR) has delivered a draft Bankable Feasibility Study (BFS) to the Government of Western Australia, which demonstrates strong technical feasibility for the development of the Oakajee port and rail project.

Draft Implementation Agreements for the port and rail have also been delivered to the State.

Both parties have substantially progressed the terms of these agreements and will continue to work together to progress outstanding matters, targeting finalisation toward the end of the year.

OPR Chief Executive John Langoulant said the draft BFS reflected detailed engineering and technical studies, and commercial analysis undertaken over the past three years and would allow the State Government to undertake due diligence to support its funding commitment.

"OPR has undertaken an extensive process of planning, research, investigation and design studies and has found that the project is technically and operationally feasible," he said.

In March 2009 the State appointed OPR to create an integrated open access multi-user deepwater port and an integrated rail network.

The rail network will connect the port with mines in the mid-west, and will be capable of integrating with other rail infrastructure in the State, as it becomes feasible.

The planned initial capacity of the port is 45 million tonnes per annum including two Cape Class berths, and will be capable of expansion as demand for capacity increases.

"The positive findings of the studies, coupled with strong interest from regional miners in utilising the new port and rail supply chain, strengthen the business case and our confidence in the technical feasibility of this complex infrastructure task," Mr Langoulant said.

"The current major areas of activity include further engineering studies and progressing our approvals program together with negotiation of supply chain agreements with our potential foundation customers - Karara Mining, Sinosteel Midwest Corporation and Crosslands Resources - which we expect to complete later this year.

"By clarifying the tonnage, timing and technical requirements of foundation customers, we will then be in a better position to assess the commercial feasibility of the project targeted for completion by the end of the year."

Mr Langoulant said OPR's approach to engagement with miners and the State Government reflected interdependencies and the process of bringing together both the miners' and OPR's feasibility studies.

"OPR's business model aims to promote a close alignment of the supply chain business with commercial interests of mines," he said.

"We remain appreciative of the Premier's support of the nationally significant Oakajee project and we look forward to working with the State Government towards our next milestones, including execution of Implementation Agreements and ultimately the commissioning of the new
facilities in early 2014."