FerrAus Limited (ASX:FRS) Pilbara Project Confirmed Robust With Potential To Deliver Substantial Shareholder Value
Perth, Nov 15, 2010 AEST (ABN Newswire) - FerrAus Limited (ASX:FRS) (PINK:FRRAF) today released the results of the Pre Feasibility Study (PFS) of the FerrAus Pilbara Project in Western Australia and approved the commencement of a Definitive Feasibility Study (DFS).
The PFS estimates that, based on the key parameters described below, the Net Present Value (NPV8) of the FerrAus Pilbara Project, using an 8 per cent discount rate (real, after tax), ranges from A$1,120 million to A$1,340 million, with an after tax Internal Rate of Return (IRR) return of between 24 and 26 per cent and a discounted payback of 4 years.
Note that this is a PFS estimate only and is subject to completion of a positive DFS and if that occurs, to financing, development, operational and other risks associated with the Project.
Pre Feasibility Study
The NPV8 range of A$1,120 million to A$1,340 million, is driven by two separate rail outcomes via either the Mt Newman JV railroad or The Pilbara Infrastructure Pty Ltd (TPI) Railroad, a 100% owned subsidiary of Fortescue Metals Group Limited (ASX:FRS) (PINK:FRRAF).
The initial capital cost estimate of approximately A$960 million, includes mine and plant infrastructure, rolling stock and a capital contribution for port development.
A tariff for a rail spur to link with existing rail infrastructure, as well as a tariff for port facilities, is included in the Operating Costs.
Key consultants engaged to complete the PFS included, SKM, Snowden, Aquaterra, Calibre Rail, LFJ Consulting, Metalytics, Ecologia, Phoenix, G&G and Eureka.
The PFS is based upon the following key parameters:
- life of mine production was assessed to be 227Mt (wet);
- the final product grade is approximately 59% Fe, 2.3% Al2O3, 4% SiO2, 0.09% P, 8.3% LOI;
- product specification is comparable to Fortescue Metals Group Rocket Fines and Rio Tinto Iron Ore Pilbara Blend fines;
- average life of mine waste strip ratio of 4.32;
- pre strip costs included in operating cost;
- 75% of all ore and waste material is free dig;
- production ramping up to 15Mtpa of fines (wet);
- price and exchange rate forecast have been provided by industry experts Metalytics, with a long term fines price of US101 cents per dmtu from 2023 onwards and a long term exchange rate of US$0.77 to A$1.00;
- total operating costs are in the range A$43.5 to A$46.5 per wmt of ore sold, including the rail and port tariffs and excluding royalties, administration and marketing costs; and
- rail and port tariffs include operating costs, capital recovery and a return on capital to the funding party.
"The Pre Feasibility Study confirms the Project is robust and economically attractive with the potential to deliver substantial shareholder value," Executive Director, Bryan Oliver, said.
"FerrAus has the capacity to deliver a high quality product, which requires minimal beneficiation and there is considerable potential for further exploration success.
"The Study also examined a range of life of mine production scenarios with the rail transport component via either the Mt Newman JV railroad or the TPI railroad.
"As FerrAus is a founding member of the North West Iron Ore Alliance we expect to ship our ore through that new port development in Port Hedland," he said.
"We will now proceed with a Definitive Feasibility Study in order to be ready to commence construction of the mine in 2012 and achieve first shipments in 2014.
"During this next study stage the focus will be on optimising the mine plan, enhancing the resource base, as well as reducing capital and operating costs, before finalising a Definitive Feasibility Study.
"A number of opportunities have been identified to achieve these outcomes and we are confident we can deliver further value to the Project.
"The Board also considers it is important to maintain our exploration programs, so these will continue across all of the FerrAus Pilbara Project tenements to target additional resources.
"FerrAus is progressing a solution for rail transport between the mine and the North West Iron Ore Alliance port in Port Hedland on a number of fronts and expects to have an outcome prior to the completion of the Definitive Feasibility Study," Mr Oliver said.
About Ferraus Limited
FerrAus Limited has been delisted from the Australian Securities Exchange following its acquisition by Atlas Iron Limited. For all enquiries please visit the Atlas Iron website at www.AtlasIron.com.au
Fortescue Metals Group Ltd