THE last two years have been largely favourable for Perth-based Grange Resources, with the miner going from strength to strength in terms of production and revenue.
Grange’s business centres on the extraction of magnetite iron ore from its Savage River mine in Tasmania and the production of pelletised iron ore at its associated plant.
However, the company is now in the process of developing a second iron ore mine – Southdown, near Albany in WA – which is anticipated to be about four times the size of the Savage River operation.
On top of its recent successes Grange has also acquired a new chief executive and managing director, Richard Mehan, who has worked in the industry for more than 30 years, mostly in iron ore.
Mr Mehan said he believed he could use his experience to steer Grange towards a prosperous future.
“I was attracted to Grange because of the strength of the company and the promise at both Savage River and in Southdown,” he said.
“I hope to bring to the company my years of experience in the iron ore sector and continue [to build] on the company’s success.”
Savage River mine
Magnetite was first discovered at Savage River in 1887, and pelletised iron ore has been produced at the site since 1966.
In 2006, a feasibility study found that the mine’s life could be extended beyond 2009 to 2023, and potential investors were sought to fund the Mine Life Extension project. Grange took full ownership of the project in January 2009, but at that stage then-managing director Russell Clark was less than optimistic.
“The mine had $250 million worth of debt, we had $10 million in the bank, banks walked away from us, ships got turned away, mills broke, the dollar crashed [and] the iron ore price halved, but other than that it was a good year,” he said.
In the company’s first six months at the Savage River mine it was able to increase the value of its pellets from $65 per tonne to $150/t. Grange posted a record 2011 profit of $216.6 million: a result Mr Mehan was pleased with.
“Since July 2011, Grange Resources has achieved significant success and undergone some change,” he said. “Safety performance and production figures at Savage River reached record highs, and pellet production totalled 1.98 million tonnes for the year: another record result.”
The company recently announced that potential existed for the mine life to be extended to 2030, and Mr Mehan said he believed the next few years would be important for the growth of Grange.
“We have developed a comprehensive management operating system at Savage River that will really start to generate positive outcomes over the next few years and will  greatly as we develop new projects,” he said.
Grange’s wholly-owned and operated iron ore mining and pellet production business is the largest in Australia.
The company sources its magnetite iron ore from its Savage River mine in North West Tasmania, 100km southwest of the city of Burnie.
The open-cut mine has three pits (North, Central and South), with the North and Central pits separated by the Savage River. Grange’s 24-hour, seven-day-a-week operations in the open pit include drilling and blasting to prepare the ground, as well as the use of conventional rear dump trucks and hydraulic excavators.
The primary crusher then compresses the ore into pieces no bigger than 200mm, and it is transported to the concentrator via a 1.3km conveyor before being compacted and turned into slurry.
The slurry travels along an 83km pipeline to the pellet plant and port facilities 70km northwest of Burnie at Port Latta.
Once pelletised, with bentonite as a binder, the pellets are placed in a furnace for more than four hours and then a final screening takes place before the product is ready to be exported.
Grange has major supply contracts with Australian steel producer BlueScope Steel and Jiangsu Shangang, China’s largest private steel mill.
Shangang is also Grange’s largest shareholder, with a 47 per cent stake in the company.
With the pellet price at US$162.84/t for the first half of this year and more than 1mt of pellets shipped, 2012 has been a successful year to date for Grange.
During the same period in 2011, while prices sat at US$221.57/t, Grange only shipped about 727,000t.
Meanwhile, resources have been further boosted by the discovery of iron ore at Long Plains, about 10km from the Savage River mine, where a magnetite deposit was found following a $2 million drilling program.
The combined mineral resource for Savage River is now 343.6mt: an increase of 43.8mt from this time last year. Rockfalls Set in rugged and mountainous terrain, Savage River mine has experienced a number of rockfalls, with the most recent occurring in July.
The slide started on the eastern wall of the North Pit on July 18 and continued for two days.
However, due to geotechnical controls that predicted the potential for a fall, all staff and equipment were removed from the area and no one was injured.
Workplace Standards Tasmania was notified and Grange was given the green light to continue production.
Mr Mehan said Grange’s handling of the rockfall was further indication of the company’s successful safety procedures, under which no injuries had occurred for almost two years.
“We’re pleased to report no lost time incidents recorded for over 23 months and the total recordable injury frequency rate is also well below industry average,” he said.
Mr Mehan said the company would review its mine plan to prevent a repeat of the incident but was confident in the ability of its equipment to detect potential slides.
“The in-ground monitoring system remains in place to predict potential ground movements,” he said.
According to Grange’s recent half-yearly report, the rockslide resulted in phase two remediation works, originally planned for 2015, to be brought forward to 2013. “This will require ore to be sourced from other deposits on the mine site on several occasions during the remediation work,” the report stated.
“Grange does not anticipate any material adverse impact on our 2012 production target at this stage.”
With consistent production being achieved at Grange’s long-life Savage River asset, the company has turned its attention to a second magnetite project about 90km from Albany.
The Southdown magnetite project is a joint venture between Grange (70 per cent) and Japan’s Sojitz Resources and Technology (30 per cent), and will involve the construction of a large-scale mine, power line, slurry pipeline to the Port of Albany and a desalination plant, along with major infrastructure upgrades to current port facilities.
Grange undertook a pre-feasibility study for the project in April 2011, and the definitive feasibility study (DFS) was completed the following month.
In July, Grange was awarded the final major environmental permit required to begin work on the project.
WA Environment minister Bill Marmion signed off on plans for the project’s desalination plant, which will supply 12 gigalitres of water to the mine per year andcost Grange about $200 million to construct.
Mr Clark said it was a significant milestone for the venture. “Southdown is a well advanced project with all its major environmental permits in place,” he said.
“The desalination permit follows the granting of the mine permit in 2009, and the awarding of the port expansion permit in 2010.”
Mr Clark said Southdown was a major infrastructure venture as well as a resource project, and would employ an estimated 2000 people during construction and provide ongoing work for about 600 people once fully operational.
“[Southdown] will not be dependent on a fly in, fly out workforce like many of the projects currently being developed elsewhere in WA,” he said. “Instead, most of the workforce will be recruited locally; providing the project with some insulation from the skills shortages affecting other areas of WA.”
The open-pit mine is expected to have a minimum life of 19 years, with the potential for up to 40 years of production.
Grange has anticipated production of about 10 million tonnes per annum of high-grade magnetite concentrate from Southdown, and estimated the deposit to contain at least 698mt of magnetite and up to a maximum of 1 billion tonnes.
The mine will require a 330kV power line to link the site to the Muja sub-station near Collie, about 288km to the project’s northwest. A 100km pipeline buried at a depth of 1.5m is proposed to transport the concentrate slurry to the port in Albany, and the return water supply to the mine from the port.
The power line and pipeline are expected to cost $230 million and $200 million respectively. Grange will also fund a $400 million upgrade of the Port of Albany, including the construction of a new wharf, filtration plant and storage shed.
In addition, the company plans to deepen, widen and extend the existing channel to cater for Cape-size (18m draft) vessels.
The works will increase the port’s capacity from 4mt to 14mt, and will be undertaken by the Albany Port Authority.
In February 2012, Grange announced it had already spent $150 million on the venture. Mr Mehan recently admitted the company needed to sell part of its stake in the development to support funding.
As such, Grange had appointed corporate funding advisor Deutsche Bank to aid in this regard, with Standard Chartered Bank assisting as a debt advisor in the lead up to the 2013 final investment decision (FID).
Mr Mehan said the next year was when things would start to take shape.
“The next 12 months will be significant period for Grange,” he said. “We will make [a] FID on Southdown and continue to invest in Savage River’s future through capital investment and exploration
Mr Mehan said the project remained on target for first production in 2015.