Karara enters the home straight

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 30 Apr 2012   Posted by admin

PERTH-based iron ore explorer and developer Gindalbie Metals has developed an exciting asset portfolio in WA’s Mid West region, including its world-class Karara iron ore project.
The company’s aggressive three-phase growth plan to increase production from Karara – 8 million tonnes per annum by the end of 2012, to 16mtpa in phase two, towards an eventual target of 30mtpa
– has been put into motion, with first ore from the Karara open pit mined in February.
The Karara project – 200km east of Geraldton – is being developed byKarara Mining (KML): a 50:50 joint venture between Gindalbie and Chinese steel producer AnSteel. The project involves the development of a long-life magnetite operation with the potential to produce more than 30mtpa for more than 30 years, as well as number smaller-scale, high-grade hematite operations. The magnetite operation requires the construction and operation of a major process plant plus significant port and rail infrastructure in order for stage one and two growth targets to be achieved. With construction and production targets for stage one being met ahead of schedule, Gindalbie has already moved ahead with its stage two expansion study. Project cost blowouts KML made a bold decision to begin construction in 2009, despite the detailed planning and design elements of the project still being in their formative stages. This exposed the company to a significant capital cost revision mid-2011.
The comprehensive review of the Karara project led to a revised total construction cost estimate of $2.57 billion, a substantial increase from the $1.975 billion announced in May 2010. About $1 billion of the overall cost has been invested in the construction of infrastructure, but Gindalbie chairman George Jones said this up-front infrastructure cost would result in substantial long-term savings. “This move enabled the partners (KML and AnSteel) to order long-lead items for the processing plant which, had a more conventional approach been adopted, would not otherwise have been available until 2014 or later,” Mr Jones
“The upshot of this is that Karara is set to be producing magnetite concentrate in 2012: at least two years earlier than would have been the case had a final investment decision been delayed until all detailed design work was finished,” he said. Also, while fellow Mid West iron ore projects will likely face development delays due to the delayed Oakajee port project, KML has been able to push ahead with its production schedule due to its secured 16mtpa capacity at Geraldton Port. “Had we waited until final designs and costings were completed, I believe it is unlikely that Karara could have secured all of this capacity, leaving it significantly more exposed to the delays at Oakajee,” Mr Jones said. The softened impact of these cost blowouts also owes much to Gindalbie’s relationship with its JV partner, and one of China’s largest steelmakers,
AnSteel. Since signing the Karara JV agreement in September 2007, AnSteel has invested more than $743 million in the project. The benefits of having AnSteel as Karara’s strategic partner include a guaranteed 100 per cent offtake for the life of the mine and project funding support, with the partners also signing a memorandum of understanding (MOU) that will target a range of resource development opportunities including iron ore, coal, manganese, chromite and nickel assets.
Trial mining began at the Karara South and Karara East direct shipping ore (DSO) deposits in late 2010, with the ore mined sold under a short-term ore agreement with Sinosteel Midwest Corporation (SMC). The eight-month contract – which began April 2011 – was for a total 480,000t of high-grade hematite ore and used SMC’s existing rail facilities plus Geraldton Port facilities.
During 2011, KML substantially increased its 2004 JORC-compliant magnetite ore reserve at Karara to 955.5mt grading 36.4 per cent iron, which was calculated following the re-optimisation and re-design of the Karara open pit.
The upgrade represented a massive 83 per cent increase on the probable ore reserve reported in the company’s 2010 Annual Report, with the total JORC resource now standing at 2.409 billion tonnes grading 35.9 per cent iron.
The main Karara ore body remains open at depth and along strike to the


By Reuben Adams

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