The Apurimac project is located 16km from the town of Andahuaylas, the largest town in the Apuirmac province of Peru with a population of 250,000 people.
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In July 2008 the Company completed a Pre-Feasibility Study (PFS) for the Apurimac Iron Ore Project (the Project), in Peru.
The PFS, which took nearly a year to complete at a cost of approximately A$2.75 million, focused upon the development of a 20 million tonne per annum (20Mtpa) mining operation with iron ore concentrate transported to the coast for shipment via a slurry pipeline.
The PFS confirmed that the Project has the potential to become a highly profitable world class iron ore operation, with:
· JORC Indicated Resource of 133 million tonnes (Mt)
· Average operating costs of approximately US$14.5 per tonne
· Total capital cost of approximately US$2.3 billion
· High quality product grading +68%Fe, very low in Alumina, Phosphorous and other impurities
First production from the Project is scheduled for the first half of 2012. Strike is now focussing on expanding its resource inventory in Apurimac and the commencement of a Bankable Feasibility Study (BFS).
DETAILS OF PRE-FEASIBILITY STUDY
In August 2007, Strike commenced its PFS programme, under the overall supervision of Strike Director Professor Malcolm Richmond, to support a 20 Mtpa mining operation from its Apurimac Project area. The PFS included a series of studies project managed by Sinclair Knight Mertz (SKM). These studies covered the following broad areas:
STUDY | PRIME RESPONSIBILITY |
Geology, Mining and Resource | Snowden Group |
Mineralogy, Petrology and Characterisation | CSIRO |
Process system design and testing | Sinclair Knight Merz |
Plant and Site, Mechanical, Electrical, Power Supply, Port and Mine | Sinclair Knight Merz |
Infrastructure Mine and Port | Sinclair Knight Merz |
Port facilities Marine | COSAPI S.A. |
Pipeline Design | Pipeline Systems Incorporated (PSI) |
Community and Environment | Sinclair Knight Merz |
Risk Analysis | Sinclair Knight Merz |
Capital Cost Estimate and Operating Cost Estimate | Sinclair Knight Merz |
The results of these studies are summarised below:
OPERATING COSTS
Average operating costs (excluding contingency, royalty and depreciation charges) per tonne of dry concentrate at full production are estimated (with an accuracy of +25%/-10%) to be US$14.49 per tonne.
An additional provision for contingency or ‘risk’ costs has been estimated at $1.45 per tonne.
Operating Costs
| | | Cost US$/t dry |
Description | | | Concentrate |
Process, General and Administration | 0.93 |
Reagents and Consumables | | 1.03 |
Infrastructure | | | 0.40 |
Power | | | 2.74 |
Spares | | | 2.78 |
Mining and Geology | | 6.30 |
Port Operations | | 0.32 |
Total | | | 14.50 |
Contingency | | | 1.45 |
Total incl. Contingency | | 15.95 |
These operating costs are extremely competitive when compared with current and planned producers in Australia. Furthermore, this competitive advantage is likely to improve over time due to significantly higher inflationary pressures in the mining sector in Northern Australia compared to that in Peru.
Operating Cost Comparison with Australian Iron Ore Companies
Company | Cash costs before royalties A$/t FOB |
Strike Resources (US$/t) | 16 |
Fortescue Metals (FMG) – DSO | 24 |
BHP (US$/t) | 29 |
Rio Tinto (US$/t) | 30 |
Midwest Corporation – DSO | 38* |
Murchison Metals – DSO | 38* |
Mount Gibson – DSO | 42 |
Portman – DSO | 42 |
Grange Resources – BFO | 45 |
Gindalbie Metals - DSO | 48 |
Source: BBY Limited (from Company Reports and Forecasts)
* Includes A$9 capital charge for rail and port
DSO = Direct Shipping Ore BFO = Beneficiated Feed Ore
CAPITAL COST ESTIMATES
Total direct and indirect costs for the project including engineering, procurement and commissioning are estimated (with an accuracy of +25%/-10%) to be approximately US$2.3 billion.
An additional provision for contingency or ‘risk’ costs (which also includes an allowance for further possible savings, presently under review) has been estimated at US$200 million.
Capital Cost by area
Description | Cost US$M |
Mine Site and off site infrastructure | 361,082 |
Process Plant | 341,971 |
Tailings | 48,329 |
Concentrate Pipeline | 489,962 |
Port | 280,962 |
Water Supply | 34,886 |
Electrical and Communications | 54,654 |
Total Indirects | 692,765 |
Total | 2,304,611 |
Contingency | 200,555 |
Total incl. Contingency | 2,505,166 |
Indirect costs include (among other items) an allowance for Engineering, Procurement, Construction Management (EPCM), equipment freight and insurance, customs duties, start-up and commissioning.
The capital cost estimates were developed from a detailed work breakdown structure of each process, with costs for equipment based upon budget quotations from major suppliers. A selection of contractors and suppliers were interviewed to compile relevant information for setting applicable rates and costings. A field survey in Peru was also completed, to check the correctness of rates.
FINANCIAL EVALUATION
Financial analysis by Strike confirms that the Project economics are potentially highly attractive.
The capital and operating cost estimates from the studies, together with a conservative assumption of an average price of US$60 FOB per tonne of concentrate, suggest the Project will generate an operating cash surplus in the first full year of production of approximately US$890 million. If iron prices maintain their current levels (equivalent to approximately US$94 FOB), operating cash surplus in the first full year of production is forecast to reach approximately US$1.44 billion and would be sufficient to repay the Project’s capital cost within 2 years.
GEOLOGY AND RESOURCE
The focus of this study has been the Opaban I and Opaban III deposits, which were previously announced by Strike to represent a JORC Inferred Resource of 172 million tonnes at 62.28% Fe.
The Resource Estimate by Snowden Group has now provided a significant re-rating of the resource, from Inferred to Indicated status, delivering a total JORC Indicated Resource of 133,530,000 tonnes, more than 93% of which has been included in the mine plan.
JORC Indicated Resource Estimate
Location | Tonnes | Fe% | AI2O3% | SiO2% | P% | S% |
Opaban I | 125,000,000 | 59.26 | 2.12 | 7.87 | 0.04 | 0.14 |
Opaban III | 8,530,000 | 62.08 | 1.37 | 4.58 | 0.07 | 0.25 |
Total/Average | 133,530,000 | 59.40 | 2.07 | 7.66 | 0.04 | 0.15 |
The main Opaban I deposit is an iron-skarn deposit, tabular-shaped and generally flat-lying. Drilling has so far defined the dimensions of a mineralised body as being approximately 1,600 metres long by 300 metres wide, in a zone in which massive iron oxide deposits occur in several locations along a 5 kilometre northwest trend.
TRANSPORTATION
The transportation of ore will be by slurry pipeline from the mine site to the port. The pipeline route has been determined and is 363 kilometres in length. This route is shown in Annexure A.
The pipeline will consist of 26/22 inch diameter, unlined, API X70 steel pipeline with two pump stations, one valve station and five choke stations.
The pump stations will be located one at the mine site and one located 85 kilometres along the pipeline route. The pump stations will provide the energy to transport the concentrate through the pipeline.
The valve station will be required to isolate the pipeline system into two separate parts when the pipeline is shut down, reducing the static head in the pipeline system to approximately 4,000 metres of iron ore concentrate.
The chokes will be required to dissipate energy (dynamic head) in the pipeline as the iron-ore concentrate descends from approximately 4,000 metres off the Peruvian Altiplano.
MINING INFRASTRUCTURE
A conceptual mine study into the Opaban I and Opaban III resources has been developed upon the basis that additional resource inventories are identified to support a production rate of 20Mtpa over 20 years.
This study has provided:
· Conceptual pit designs and infrastructure
· Conceptual site layout, including location of main waste dump and haul roads
· Conceptual mining schedule aimed at optimising value during the extraction of the Opaban I and Opaban III resources and conceptual satellite deposits
· Estimation of operating costs and capital costs for the mining operation
Mine strip ratios have been estimated at 1.71 for Opaban I and 0.66 at Opaban III. A more detailed geotechnical drilling programme will be required to ensure the correct pit slope angle is used. A highly conservative angle of 35 degrees has been used for the study, so the potential exists to steepen the slope and therefore reduce the strip ratio and further reduce mining costs.
MINERALOGY, PETROLOGY AND CHARACTERISATION
CSIRO were commissioned to complete characterisation of the mineralogical and petrological characteristics of iron oxides from the various ore types found in the Opaban I deposit.
The work identified four important characteristics:
· The iron mineralogy is made up of 60% hematite and 40% magnetite
· The ore is coarse grained
· There is widespread internal fracturing within the grains
· The gangue minerals comprise silicates which are, relative to iron minerals, very soft
Magnetic (low intensity and high intensity) test work on reverse circulation chip samples was very successful and has returned product grades at coarse crushing with particle sizes of 80% passing 125 and 250 microns as follows:
Metallurgical Test Work Results
Product | | Grade | |
Fe | 68.02 % | to | 68.28% |
Al2O3 | 0.30% | to | 0.35% |
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