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Yilgarn iron juniors poised for take off The Yilgarn Iron Province Western Australia's next big thing What’s Down the Track Conference Kalgoorlie – October.

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Presentation on theme: "Yilgarn iron juniors poised for take off The Yilgarn Iron Province Western Australia's next big thing What’s Down the Track Conference Kalgoorlie – October."— Presentation transcript:

1 Yilgarn iron juniors poised for take off The Yilgarn Iron Province Western Australia's next big thing What’s Down the Track Conference Kalgoorlie – October 24, 2013 David Utting YIPA CEO www.yipa.com.au

2 Iron Ore - Highlights in 2012-13 Iron ore remains the State's most valuable sector of the mining industry Accounts for $56.4 billion (73 per cent) of the mineral sector’s total sales Although this result was 7.3 per cent lower than the 2011– 12 year, increased output of 13 per cent (58 million tonnes) helped to offset weaker prices and a strong Australian dollar In total 513 million tonnes were exported in 2012–13 Slide 2

3 Iron Ore Outlook Positive HEALTHY PRICE - $US133 a tonne during the September quarter WA GROWTH - WA 900 Mtpa export in 2018 (Deloittes) CHINA DEMAND - iron ore imports up 14.7% in Sept compared with last year CHINA GROWTH - third quarter growth forecast to be between 7.6% and 7.7% Financial Review 14/10/2013 3

4 Iron Price Bounce Back Reasons for end of September 2012 price slump 1. Chinese steel demand to peak in ~ 2030 2. 2012 volatility been driven by destocking and restocking cycles 3. Seasonality not as big a factor 4. 2012 about China influencing price 5. New China government now firmly in control 6. China 7+% a must for new government 7. Today, 7% annual growth on a huge economy requires much more iron ore than 15% on a much smaller economy a few years back 8. High cost China iron mines closing Slide 4

5 Mindax – Recent, $52m JV with Hong Kong PMHL to take Mt Forrest to mining at 2 Mtpa Golden West – recent approval for mining at 10 Mtpa from its 59% Fe, 130 Mt Wiluna West mine Cazaly - completed a DFS, set to mine 4 Mtpa from Parker Range @ 55.9% Fe Radar - Johnston Range pits up to 1 Mtpa Mindax – Recent, $52m JV with Hong Kong PMHL to take Mt Forrest to mining at 2 Mtpa Golden West – recent approval for mining at 10 Mtpa from its 59% Fe, 130 Mt Wiluna West mine Cazaly - completed a DFS, set to mine 4 Mtpa from Parker Range @ 55.9% Fe Radar - Johnston Range pits up to 1 Mtpa Junior miners poised for action 1.1Mindax Ltd 2.2Golden West Resources Ltd 3.3Cazaly Resources 4.4Radar Iron Ltd Slide 5

6 YIPA - A Track Record of Achievement Slide 6 Fourth year of constructive engagement with government and industry Recent Engineering Studies a WA first with seven companies sharing data, objectives and costs Mapping the path from mining to export Strong links with Government and Agencies inc EPSL Engaging and giving input to port proponents, third party rail & infrastructure Engaging with Local Communities and Shires Engaging with KBCCI, ECCI, GIOA, AMEC and other industry bodies Strong links with Government and Agencies inc EPSL Engaging and giving input to port proponents, third party rail & infrastructure Engaging with Local Communities and Shires Engaging with KBCCI, ECCI, GIOA, AMEC and other industry bodies

7 1.Cliffs Natural Resources Pty Ltd 2.Mineral Resources Pty Ltd 3.Mindax Ltd 4.Golden West Resources Ltd 5.Cazaly Resources 6.Radar Iron Ltd 7.Fe Ltd 8.Meteoric Resources NL 9.Buxton Resources 1.Cliffs Natural Resources Pty Ltd 2.Mineral Resources Pty Ltd 3.Mindax Ltd 4.Golden West Resources Ltd 5.Cazaly Resources 6.Radar Iron Ltd 7.Fe Ltd 8.Meteoric Resources NL 9.Buxton Resources YIPA Membership Key members representing the serious mining players Members represent all stages through exploration to production (inc 15+ Mtpa production) Energetic and smart, near term miners eg MDX, GWR, CAZ Great example of a contemporary trade association Slide 7

8 Yilgarn Iron Province (YIP) Key attributes are: Abundant iron ore deposits Proximity to existing infrastructure - rail, gas and road Ports – Esperance, Kwinana, Albany, Bunbury, Geraldton, Oakajee Proximity to a mature mining culture/logistics in the Goldfields Concentration of iron resources geographically Companies willing to work together through common interest Slide 8

9 Substantial Iron Endowment DSO Inventory CETJORC New Near Term ~2015 Production 1.1 B tonnes785 M tonnes10+ Mtpa PBM InventoryCETJORC Longer Term Production 2011 Data 14.5 B tonnes4.7 B tonnes20+ Mtpa Cliffs export approaching 11.5 Mtpa Mineral Resources 4.4 Mtpa New miner strategy – quick/cheap DSO exploitation funding later magnetite for some CET/JORC increasing with on-going exploration Slide9

10 Why the Yilgarn Iron Province? Infrastructure Advantages Open access to road, rail and port facilities Infrastructure Govt owned, Independent operators Cheap, brownfields incremental infrastructure upgrades Spare rail & port upgrade capacity – two keen infrastructure proponents bidding for expansion – (Qube, Brookfield), (Asciano, MacDow, Murabeni) Major issues for juniors in Pilbara & Mid West Slide 10 DSO + MagnetiteGrowth potential RAIL access PORT access Pilbara Access issues Mid-West Difficult/ not constructedGel’ton full / Oakajee cold Yilgarn Spare capacity - Indep controlled X X X X X X X X

11 Building the case for mining, transport & export Key Studies Undertaken Slide 11 YIPA Studies carried out by AECOM: 1 Supply Chain Study (completed October 2012) 2Esperance Port Financial Modeling Study (completed December 2012) 3Economic Impact Study (completed January 2013) 4 Advanced HL Rail Study (completion later May 2013) 5KPMG MUIOF State Guarantee Study (underway) YIPA Studies carried out by AECOM: 1 Supply Chain Study (completed October 2012) 2Esperance Port Financial Modeling Study (completed December 2012) 3Economic Impact Study (completed January 2013) 4 Advanced HL Rail Study (completion later May 2013) 5KPMG MUIOF State Guarantee Study (underway)

12 Economic Impact Study Big benefits to WA (Completed January 2013) Slide 12 10 Mtpa of iron ore production and logistics (not port) State Government royalty receipts of $95 m per annum (assume US $120 per tonne) Construction stage - full-time equivalent (FTE) jobs Direct employment for up to 1,000 workers Indirect 3,227 workers throughout the economy Operational stage - full-time equivalent (FTE) jobs Direct employment for up to 360 people during mine operation 1,170 jobs elsewhere in the economy 10 Mtpa of iron ore production and logistics (not port) State Government royalty receipts of $95 m per annum (assume US $120 per tonne) Construction stage - full-time equivalent (FTE) jobs Direct employment for up to 1,000 workers Indirect 3,227 workers throughout the economy Operational stage - full-time equivalent (FTE) jobs Direct employment for up to 360 people during mine operation 1,170 jobs elsewhere in the economy

13 Esperance Port - Bird’s Eye View Slide 13 Footprint tight but workable 11.5 Mtpa and set for growth Capesize capable

14 Esperance Port Financial Study (completed December 2012) Slide 14 Upgrade is Commercially Viable Modelled key parameters including: capital intensity, return on investment, period of investment, tonnage and tariff structure and rates Suggests ‘sweet spot’ where tariffs, fees & cost structure are acceptable for miners, proponent & EPSL Suggests low capital ($150m) and incremental upgrade for the stage one export of ~10 Mtpa DSO Echoes findings of YIPA’s October Supply Chain Study Upgrade is Commercially Viable Modelled key parameters including: capital intensity, return on investment, period of investment, tonnage and tariff structure and rates Suggests ‘sweet spot’ where tariffs, fees & cost structure are acceptable for miners, proponent & EPSL Suggests low capital ($150m) and incremental upgrade for the stage one export of ~10 Mtpa DSO Echoes findings of YIPA’s October Supply Chain Study

15 MUIOF State Guarantee Study underway by KPMG THE CHICKEN & EGG PROBLEM Miners find it difficult to fund ‘take or pay’ without a port Port upgrade can’t happen without ‘take or pays’ Possible Non-financial WA Government support – guarantee of well sub $150m non-contingent liability, balance sheet neutral Supports balance sheet, not a drag because upgrade pumps almost $1 billion into State coffers in a decade – inc $95m pa in Royalties Non- financial mechanisms - each can be made conditional in terms of timing, quantum and fees Guarantee for the take or pay arrangements Guarantee for a minimum tonnage at the port Guarantee the underlying debt facilities Pursue Federal/WA Government funding eg $660m Oakajee money or R for R Slide 15

16 Modest Esperance Port Upgrade Enabler for new exports Slide 16 DSO Stage 1 - Additional ~10 – 12 Mtpa Learning lessons of Oakajee – no gold plating Latest Cap Cost estimated at $150m Tariff structure economically viable for miners No Seabed reclamation eg no 2+ year additional environmental approval process EPSL says early 2015 completion date Upgrade Stage 1 - Infrastructure New car dumper (bottom or rotary) Negative pressure storage (~800,000 tonnes) New rail and conveyer systems Possible upgrade ship loader from 4,500 to ~ 5,500 tph (tonne per hour) currently averaging 2.5 tph DSO Stage 1 - Additional ~10 – 12 Mtpa Learning lessons of Oakajee – no gold plating Latest Cap Cost estimated at $150m Tariff structure economically viable for miners No Seabed reclamation eg no 2+ year additional environmental approval process EPSL says early 2015 completion date Upgrade Stage 1 - Infrastructure New car dumper (bottom or rotary) Negative pressure storage (~800,000 tonnes) New rail and conveyer systems Possible upgrade ship loader from 4,500 to ~ 5,500 tph (tonne per hour) currently averaging 2.5 tph

17 Conceptual Upgrade - Stage 1 Estimate additional ~10 Mtpa Slide 17

18 Esperance Upgrade Timeline Slide 18 Two very experienced consortia: Qube Bulk Pty Ltd and Brookfield Infrastrucure (Aust) Yilgarn Esperance Solution (YES) comprised of McConnell Dowell Constructors (Aust), Asciano (parent company of Pacific National) and Marubeni Corporation Ltd EPSL’s stated timeline By Nov 22, proponents submit final bids for assessment March 20, 2014 successful bidder selected June 30, 2014 EPSL financial closure with winner Financial closure with miners ????? Design and approvals ????? 18 month construction period Construction of the upgrade to begin in early 2014 but EPSL expected to revise Early 2015 completion date but EPSL expected to revise EPSL’s stated timeline By Nov 22, proponents submit final bids for assessment March 20, 2014 successful bidder selected June 30, 2014 EPSL financial closure with winner Financial closure with miners ????? Design and approvals ????? 18 month construction period Construction of the upgrade to begin in early 2014 but EPSL expected to revise Early 2015 completion date but EPSL expected to revise

19 Supply Chain Study (completed October 2012) Slide 19 Examined rail and port infrastructure Concludes modest rail upgrades progressively required as tonnages increase Modest Port upgrade of about 10 - 12 Mtpa (Stage 1) Incremental in nature Rail north/south: Leonora, Kalgoorlie, Esperance Rail east/west: Koolyanobbing, West Kalgoorlie, Esperance New signaling in places Modest number of additional passing loops Re-sleepering, ballast in places Rail north/south: Leonora, Kalgoorlie, Esperance Rail east/west: Koolyanobbing, West Kalgoorlie, Esperance New signaling in places Modest number of additional passing loops Re-sleepering, ballast in places

20 Stage 2 - Esperance Port Upgrade Slide 20 1. Current – 11.5 Mtpa 2. Stage 1 DSO - Additional ~10 Mtpa 3. Stage 2 Magnetite – additional ~ 15-20 Capital cost larger Seabed reclamation required Five to six year construction horizon but 3-4 if conditions improve Upgrade Stage 2 Infrastructure New berth to allow for two Cape sized ships New ship loader, sheds, conveyors Rail balloon loop 1. Current – 11.5 Mtpa 2. Stage 1 DSO - Additional ~10 Mtpa 3. Stage 2 Magnetite – additional ~ 15-20 Capital cost larger Seabed reclamation required Five to six year construction horizon but 3-4 if conditions improve Upgrade Stage 2 Infrastructure New berth to allow for two Cape sized ships New ship loader, sheds, conveyors Rail balloon loop

21 Portlink – Kalgoorlie Rail Infrastructure Community consultation open & information day on October 19 Possible intermodal terminal in Kalgoorlie (3 options) Freight rail bypass around the town centre (3 options) Slide 21

22 Portlink Kalgoorlie Rail Options Option 1 appears cheapest/least congestion? Slide 22

23 Menzies – infrastructure surge New light industrial area south of the town Co-located multi user iron ore truck to rail load out facility Truck logistics and maintenance Depot/workshops Mine admin facility Road upgrades Menzies will require additional temporary resources to cope with an upcoming increase in development activity Slide 23

24 Western Australia's next big thing Yilgarn Iron Province: second only to the Pilbara Success from a prudent approach: Close co-operation between miners Quality stakeholder engagement with local communities, infrastructure providers, port proponents, EPSL and Government Modest capital investment Commercial viability Incremental approach to rail, port Thank you! www.yipa.com.au Slide 24


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