Kemaman Pellet Plant

In February 2005, Grange announced that it had entered into a Heads of Agreement with Road Builder (M) Holdings Bhd, a publicly listed Malaysian company, to acquire up to a maximum of 60 hectares of land in an industrial estate adjacent to the port of Kemaman to build a magnetite pellet plant and secure access to port facilities at the West Wharf. The Kemaman Pellet Plant will use concentrate shipped from the Southdown Magnetite Project to produce high quality iron ore pellets. The Kemaman site was selected as the preferred location for a number of reasons including the following:

  • Availability of competitively priced energy supplies including natural gas and electricity.
  • Close proximity to potential off-take parties and markets.
  • Very competitive export sea freight.
  • Access to port infrastructure with low operating costs.
  • Availability of a skilled construction and operating workforce.
  • The potential granting of government incentives including tax benefits and the exemption from import and export duties.
  • Ability to expand through the provision of additional pellet plants.

The key components of the Kemaman Pellet Project comprise the following:

  • The pellet plant.
  • Stockyards for pellets and concentrate with mobile stackers and reclaimers.
  • A ship loader (nominally 4,000 tph) capable of loading iron ore pellets into capesize vessels.
  • Two ship-unloaders (nominally 2,000 tph each) capable of unloading magnetite concentrate from capesize vessels.
  • Conveyor systems between the ship-unloaders and ship loader and the concentrate and pellet stockyards.
  • Office, maintenance, laboratory and other facilities as necessary.
  • The provision of services from water, natural gas and electricity providers.

Provision has been made in the infrastructure for the future construction of additional pellet plants on the Kemaman site.

Pellet Plant Facility

The Kemaman Pellet Plant facility will be designed for an ultimate capacity of 6.8 Mtpa.

Testing of the ground conditions at the Pellet Plant site has been completed. Results of the tests indicate that pre-loading of areas on the site will need to be undertaken as soon as the project commences.

West Wharf

The West Wharf consists of an existing jetty with a concrete deck approximately 510 metres long by 29 metres wide, sufficient to berth a Capesize and Panamax vessel concurrently. The depth of the berth pocket was originally dredged to 18 metres although parts of the turning basin had not been fully dredged. Under the terms of the Heads of Agreement, Road Builder is required to provide port access for vessels with a draft of 16m.

Dredging of the turning basin to ensure that Road Builder meet this requirement has been completed during 2006.

 

Power Supply

Tenega Nasional Berhad (TNB) is the national electricity provider for Malaysia. High voltage power is available from a TNB substation immediately next to the pellet plant site. TNB have indicated that they would be able to supply power to an agreed location within the pellet plant site via a 132kV line. Discussions have commenced with TNB to seek the best possible power price and terms for the project.

Natural Gas Supply

Natural Gas for the pellet plant is available from the national supplier, Petronas Gas via a pipeline that runs along a road adjacent to the pellet plant site. Petronas Gas would supply the gas to the pellet plant site via a new lateral from the pipeline to a designated supply point on the pellet plant site. A formal application for the supply of gas has been made to Petronas Gas.

Conveyor Corridor

An infrastructure corridor exists between the West Wharf and the pellet plant site. A pipe conveyor system has been designed for the transport of imported Southdown concentrates and the export of Kemaman iron ore pellets. This pipe conveyor would be sited within or adjacent to the infrastructure corridor.


MALAYSIAN INVESTMENT INCENTIVES

In April 2006, Grange Developments Sdn Bhd (GDSB), a wholly owned subsidiary of Grange Resources Limited, lodged an Application for Pre-Packaged Incentive for the Kemaman Pellet Plant and associated infrastructure with the Malaysian Industrial Development Authority (MIDA). GDSB is responsible for the planned development of the iron ore pellet plant operation to be built at Kemaman.

In September 2006 the Malaysian Government advised that it had granted a substantial tax incentive package to GDSB for the Kemaman Pellet Plant Project. The Malaysian Minister of Finance approved Pioneer Status for the project with a package of special incentives including:

  • A 100% corporate income tax exemption at the statutory income level for a period of 15 years.
  • An Infrastructure Allowance to construct and provide infrastructure to the West Wharf at Kemaman Port. The Company can offset the Allowance against 85% of the statutory income after the 15 year tax exempt period.
  • A 100% exemption on Withholding Tax applicable on payments to non-residents for interests, royalty, services and contracts for a period of 5 years commencing from 2007.
  • An exemption on import duty and sales tax on all raw materials and machinery imported into the country by Grange used directly in the manufacturing of iron ore pellets.
  • 25 expatriate positions to operate the project, and
  • A Matching Training Grant of RM1 million (AUD370,000) for a period of four years beginning 2009.


The package is one of the best packages offered by the Malaysian Government in relation to a project of this nature. The 15 year tax exempt period is beyond the standard 5 or 10 year tax exempt period normally given. This incentive package substantially improves the project economics of the Kemaman Pellet Plant.


KEMAMAN ENVIRONMENTAL APPROVALS

Environmental Approval for the Kemaman pellet plant has been received from the Ministry of Natural Resources and Environment. This approval sets out the conditions under which the plant can operate. Grange is pleased that the environmental conditions set for the pellet plant are appropriate for a project of this scale. An appeal has been lodged in respect to one condition relating to material storage areas however Grange is confident that this condition will be amended as requested.