2012 Annual Report (2 April 2013) - Grange Resources

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2012 ANNUAL REPORT
Review of Operations (cont.)
SOUTHDOWN MAGNETITE PROJECT
The Southdown Project ultimately aims to export 10 million tonnes per year of magnetite
concentrate to Asian steel markets. The Southdown Joint Venture (SDJV) is a joint
venture between Grange Resources Ltd (70%) and SRT Australia Pty Ltd (SRTA) (30%).
SRTA is jointly owned by Sojitz Corporation, a Japanese global trading company, and
Kobe Steel, Japan’s third largest steel producer.
Key 2012 Achievements
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Completed a definitive feasibility study in April 2012 which improved the project’s
level of accuracy to +/- 15%
Progressed project engineering, land acquisition, permitting, drilling and test work
Initial capital expenditure estimated at A$2.885 billion (including EPCM; owners’
costs and contingency of $0.535 billion)
Operating costs estimated at A$58.5 per tonne of premium quality concentrate
(69.6% fe) containing low contaminants (excl. royalties)
Submission by EPC contract tenders for major construction works by interested
parties
During 2012 the Definitive Feasibility Study (DFS) for the Project was finalised and
subsequently reviewed by an independent Technical Due Diligence Engineering firm
which did not identify any fatal factors in the Southdown Feasibility Study.
During 2012 Engineering, Procurement and Construction (EPC) tenders were issued to
the market for major project packages. The tenders received from this process were
analysed and evaluated in detail with recommendations to shortlist tenderers issued to
the Owners.
Significant milestones were achieved in the environmental area with Section 38 Approval
for the Desalination Plant received on 18 July 2012 when the Minister for the Environment
signed Ministerial Statement 904. Environmental Management Plans were also
submitted to relevant government agencies and stakeholders during September 2012.
Grange announced to the market on 29 November 2012 that it would significantly
reduce expenditure on its 70% share of the Southdown Magnetite Project. Following this
announcement the Project’s team size and scope of work has been reduced.
2013 Project Priorities
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Continue search for new equity partner to take a strategic share of the Company’s
interest
Significantly reduce expenditure for 2013 to approx. $2.5 million (Grange share)
Maintain all tenements, permits and project assets in good order
Grange has the in house skills, systems, capability and discipline to deliver Southdown’s
potential when the time is right
Project Overview
Geology and Resource
The Southdown magnetite deposit is a
long, thin, near-surface, continuous ore
body. It extends over 12 kilometres, with
depths varying from 50 metres in the west
to 480 metres in the east.
The deposit has been drilled and
evaluated since its initial discovery in
1983, including an extensive program
of resource drilling during 2011 for the
feasibility study. A resource model update
was completed in December 2012 for
the deposit, significantly increasing the
quality and confidence in the resource.
The Southdown resource now exceeds
1.2 billion tonnes.
Conventional Mining
Targeted concentrate production rates
require a material movement in the mine of
up to 132 Mt per annum by conventional
drill, blast, load and haul mining methods.
The final proposed pit is six kilometres
long, one kilometre wide and about 370
metres deep. The mining operation
will draw heavily on Grange’s existing
capability as Australia’s most experienced
commercial producer of magnetite
concentrate, to assist with start-up and
ongoing operations.
Ore crushing and Concentration
The project plan envisages Southdown
ore being processed to increase the
iron content from around 25% to 69%.
Extensive metallurgical test work including
pilot plant trials have been conducted
since 2004. The process includes
crushing, grinding, classification and
magnetic separation. The concentrate is
further upgraded using hydro separation
to remove fine silica, and flotation to
remove sulphur impurities.