A bankable feasibility study (BFS) on the Wadi Sawawin iron-ore project in Saudi Arabia has indicated that the operation would be feasible at either five-million tons or ten-million tons a year, London Mining said on Wednesday.
Financing for the mining will get under way next year, and is expected to be in place by the end of 2010, the firm said.
UK-based London Mining owns 50% of the project through its interest in the Saudi London Iron joint venture, with the Saudi Arabian National Mining Company.
"The results of the BFS have been presented to the Ministry Of Petroleum and Mines in Jeddah, who continue to be supportive of the project," the company said in a statement.
The Wadi Sawawin project will supply direct reduction pellets for use in the direct-reduced-iron steel plants that account for 90% of steel production in the Middle East and North Africa.
The location of the project is expected to create a competitive advantage over Brazilian and European supply through reduced freight rates from its deep water port in the Red Sea and access to low cost Saudi Arabian oil.
The project also forms part of Saudi Arabia's efforts to diversify its economy.
The BFS assessed two potential scenarios for the project, producing either five-million or 10-million tons a year.
"The project has been shown to be technically and economically sound, scalable with a large resource base and possesses areas of strategic and competitive advantage over alternative sources of DR pellet supply due to market proximity and competitive operating costs," said London CEO Graeme Hossie.
Mining and primary crushing will take place at the mine site, after which ore will be transported 52 km by road to a beneficiation and pelletising plant on the coast, adjacent to the proposed deep-water port and related power and desalination facilities.
Capital for the five-million scenario is estimated at $2-billion, comprising $184-million for the mine and ore transportation, $399-million for processing, filtering and tailings, $246-million for pelletising and $556-million for port, power, desalination plant and other infrastructure.
The balance of the expenditure is for construction, engineering, procurement and construction management services, owners costs, design allowance and contingencies.
In this scenario, the operating cost is estimated at $47,44 per dry metric ton of pellets.
The current Jorc resource will be enough for a mine life of 14-years at a run rate of five-million tons a year, although London expects to add to the resources and confirm a 20-year mine life early in 2010.
If the company were to decide on a ten-million ton a year operation, the total capital expenditure would rise to $3,2-billion, the company said.
The Saudi London Iron joint venture is holding discussions with the Saudi Binladin Group regarding financing and offtake arrangements, London confirmed.
Standard Chartered, Milbank Tweed and Al Sawaf have been engaged to advise on the financing process and the joint venture expects to raise financing to build the project through a combination of funding from local sources, commercial debt and the provision of offtake arrangements in exchange for an equity stake.
The minimum leverage achievable is expected to be 60%, London said.
The next milestone for the project is the completion of an updated resource estimate in the first quarter of 2010.
Once financing is in place construction is anticipated to take 27 months, with commissioning currently targeted for the second quarter of 2013.
Source: Mining Weekly
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