Feasibility Study

In January 2005 Grange committed to the completion of a Bankable Feasibility Study (BFS) on the project. The BFS was undertaken on the base case of Southdown Magnetite production of 6.6Mtpa concentrate and Kemaman Pellet production of 6.8 Mtpa.

Grange engaged the following consultants to assist with the preparation of the BFS:

  • ProMet Engineers to undertake and supervise the engineering and metallurgical work, including concentrator, pipelines, ports and pellet plant.
  • Golder Associates to undertake the resource estimation, mine planning and scheduling, geotechnical engineering and hydrology.
  • AMC Consultants to review alternative mining methods.
  • Ecologia to undertake environmental studies and prepare the documents necessary for the project approvals process.
  • JFA Australia to supervise the work relevant to the Albany Port, shipping channel and dredging.
  • Rockwater to search for a water supply.
  • Perunding Utama to undertake the environmental work necessary for the development of the pellet plant and associated infrastructure in Malaysia.

Project Capital Cost

The project capital cost estimate in December 2005 dollars was estimated at US$1,175M including contingencies. This estimate was compiled as follows:

Southdown

  • Owner leased mining equipment
  • A provisional sum for prestripping
  • Equipment lists for the Southdown concentrator based on the flow sheet developed from the pilot plant test work
  • Vendor quotes for the equipment
  • Electrical costs based on the installed equipment and installation based on similar work being undertaken on other current projects
  • Construction costs based on other current construction projects
  • Construction and operating infrastructure based on current project costs
  • Slurry pipeline estimate by Pipeline Systems Incorporated (PSI)
  • Land based port facilities based on vendor quotes and current construction costs
  • Engineering costs and owners costs (including land purchases, insurances, overheads, employer training, etc)

Kemaman

  • Pellet Plant cost estimate provided by Outokumpu for Malaysian installation
  • Infrastructure based on vendor quotes and Malaysian construction
  • Civil works based on site investigations and Malaysian costs for piling and preload

The breakdown of capital costs in various currencies is Euro (16%), Malaysian Ringgit (16%), US$ (13%) and A$ (55%).

This cost estimate compares with the published capital cost of the new Samarco development of a mine expansion, concentrator and pellet plant in Brazil (7.6Mtpy) at an estimated cost of US$1,200M

Project Operating Costs

The preliminary estimate of the operating cost for iron ore pellets, free on board (FOB) Kemaman isUS$42.90/tonne using owner mining costs.

Staged Development Study

In January 2007 Grange commenced detailed mine planning and a capital and operating cost review on a staged development of 3.3 Mtpa initially with a step up to 6.6 Mtpa after a number of years. Under a staged development, it is anticipated that initial capital costs for both the Australian and Malaysian aspects of the project will be significantly lower although some key infrastructure components such as the slurry pipeline will need to be constructed to the full production capacity.