It's the end of the beginning for what had been Western Australia’s only remaining major iron ore project under construction, Citic Pacific’s Sino Iron, according to chief executive Chen Zeng, as the final two of six magnetite ore processing lines enter production.
It's the end of the beginning for what had been Western Australia’s only remaining major iron ore project under construction, Citic Pacific’s Sino Iron, according to chief executive Chen Zeng, as the final two of six magnetite ore processing lines enter production.
And the company says it is starting to get runs on the board in what has been a troubled project, with the final two lines coming well ahead of a revised schedule and below budget.
That was despite some major teething problems for the first two lines, legal battles with billionaire landowner Clive Palmer, and a big budget blow out over the life of the project.
Sino Iron is estimated to have cost upwards of $US12 billion, although the company would not be drawn on finalising a figure just yet, and follows Gina Rinehart’s Roy Hill Holdings’ $10.5 billion mine, rail and port which came online late last year.
Other mega capital projects led by Rio Tinto and BHP Billiton, which targeted capacity expansions to 360 million tonnes per annum and 270 mtpa respectively, are effectively complete.
Sino Iron differs from those operations, however, as the mine produces magnetite, a different sort of ore which requires extensive processing compared to the more common haematite.
Magnetite is generally found at a much lower grade and needs to be beneficiated, which Citic does through the six production lines.
Citic chief executive Chen Zeng said the lower grade and need to value add made the operation quite complex.
“It’s a manufacturing business with a taste of mining,” he said.
He acknowledged the project's profitability would be very sensitive to movements in the iron ore price, which has fallen dramatically during the time Sino Iron has been in construction.
Ansteel's Karara project in the Mid West, originally developed in partnership with local company Gindalbie Metals, is WA's only other magnetite project.
Mega project
The scale of the Sino Iron project is staggering.
When the project’s pit completes its quarter century mine life, it will cover an area larger than Kalgoorlie’s super pit, with a length that would span Subiaco Oval to the new Perth Stadium.
Sino incorporates a desalination plant with a capacity of about 51 gigalitres, enough to supply about 17 per cent of Perth’s needs, and a 450 megawatt power plant, which would supply a city the size of Canberra.
There’s additionally a trans shipping operation for the bulk commodity, where barges take processed ore out to be transferred at sea to an ocean going vessel, saving on the capital cost of a jetty and on dredging.
Looking forward
Mr Zeng said the immediate focus for Citic would be ramping up production, with capacity of 24 million tonnes per annum to be reached within two years.
Output is currently about half of that.
He expected demand for magnetite to grow, saying it won’t replace hematite but will be an important part of overall ore exports.
The state had vast magnetite deposits but to be valuable they required a large capital investment to beneficiate the ore to a level that can be exported, he added.
With the company learning a great deal from building what he called a "next generation" mine, Mr Zeng didn’t discount the possibility of Citic replicating the operation in another part of the state, although that would not be in the near term.
A further investment enshrined in Citic’s state agreement with the WA government would be a value adding pellet plant, which he said they would pursue when the timing was right.
He was positive about doing business in WA.
“Overall we like Australia, the business environment and the legal system,” Mr Zeng said.
“It’s a place we’d like to do capital intensive projects.”
* The journalist travelled to the Sino Iron project as a guest of Citic Pacific.
