HIGHLIGHTS
Detailed review of proposed mining operations recently completed to
optimise Paulsens East Project economics through a reduced upfront
Project Capex and LOM Opex, as well as earlier generation of cashflow
Two stage production schedule now proposed:
Stage 1 production will focus on surface detrital and low strip ratio
material of up to 400,000 tonnes to be shipped during CY 2022 through
Utah Point at Port Hedland
Stage 2 production proposed at an annualised rate of 1.5 – 2Mtpa
proposed to transition from Utah Point to Port of Ashburton in Onslow
(reducing trucking distance by ~365kms), with Stage 2 ramp-up expected
to be substantially self- funded from Stage 1
Initial Capex now forecast to be approximately $5M, significantly
improving early Project economics
Average C1 cash costs (FOB) for LOM forecast to be approximately US$63 –
69 per tonne
First ore production planned for late 2021/early 2022 (subject to FID)
Strike Resources Limited (ASX:SRK) (Strike) confirmed that it has
recently completed a review of the proposed production ramp up and
export logistics of iron ore from its Paulsens East Iron Ore Mine
(Paulsens East).
This review was undertaken as part of a pre-Final Investment Decision
(FID) process by Strike with three principal objectives:
(1) To decrease the time to ‘first ore on ship’ and review the current
mining plan of 1.5 Mtpa to maximise early cashflow;
(2) To investigate opportunities to create cost efficiencies in the
transport of iron ore to Port with a view to maximising Project
profitability; and
(3) Defer significant capital expenditures to be funded where possible
from forecast cashflows.
As a result of this review Strike now advises a significantly optimised
production strategy as follows:
(a) An expedited production ramp up with the objective of having first
production late 2021/early 2022 with steady state production ramping up
during 2022 to an annualised rate of 1.5 Mtpa.
(b) Mine ramp up to a full annualised production of 1.5Mtpa – 2.0Mtpa
in two stages, the first being the export of up to 400,000 tonnes of
surface detrital and low strip ratio material to be shipped during CY
2022 through Utah Point in Port Hedland and the second stage being an
annualised production rate of 1.5 - 2Mtpa transitioned from Utah Point
to the Port of Ashburton in Onslow to reduce trucking distance from mine
to Port.
(c) Initial capital costs (Capex) for Stage 1 production now forecast
to be approximately $5M, significantly improving early project
economics.
(d) Total Capex over life of mine (LOM) remain at approximately $15M
inclusive of $5M required for Stage 1, with remainder projected to be
funded from Project cashflows.
(e) Working capital proposed to be funded from offtake/project finance
facility which is in advanced stage of negotiation and is proposed to be
entered into once FID is made by the Board of Strike.
(f) Average C1 cash cost (FOB) across LOM forecast to be
approximately US$63 – 69 per tonne under revised production methodology
where some Capex items have been amortised into operating expenditure
(Opex) to reduce overall Project Capex.
Production Stage 1
In order to provide a capital efficient ramp up in mining operations,
Strike proposes to adopt a staged approach to the commencement of its
mining of iron ore at Paulsens East.
Given the outcropping nature of the high grade Paulsens East iron ore
ridge, which in parts lends itself to a very low strip ratio together
with the presence of high-grade surface detrital iron ore, it is
proposed that initial mining operations will focus on these two areas of
mineralisation.
Up to 400,000 tonnes of ore will be crushed and screened from these
areas to produce DSO Lump and Fines products, with estimated average
product Lump grade of ~62% Fe and Fines grade of ~59% Fe. Metallurgical
test work indicates that a 75/25 (or higher) Lump/Fines split can be
expected where Lump ore typically attracts a price premium compared to
Fines.
Mining, crushing and screening and haulage operations will be undertaken
by specialist contractors with overall supervision and management
provided by Strike’s ‘Owner’s Team’.
The processed Lump and Fines products will be trucked from the mine to
the Utah Point Multi- User Bulk Handling facility at Port Hedland (Utah
Point), predominantly by sealed road, where it will be stockpiled prior
to being loaded directly into ocean going vessels (OGV’s) for export to
customers.
As previously announced, Strike is in late-stage negotiations with the
Pilbara Port Authority (PPA) for the use of Utah Point.
Strike is currently awaiting product approval and finalisation of a
multi-user access agreement with the PPA pursuant to which it will seek
to export initial mine production from the Project. The advantages of
Utah Point are that it is an existing facility that allows for early
access, but with an attendant ~600 kilometres haulage cost from mine to
Port.
Production under Stage 1 is expected to deliver up to 400,000 tonnes of
export during CY 2022, before Strike transitions to Stage 2 exporting
through the Port of Ashburton at Onslow, which affords a significantly
shorter haulage distance of ~235 kilometres compared with ~600
kilometres to Utah Point.
Production Stage 2
Stage 2 production will focus on a ramp up in annual throughput through
conventional open pit mining of the ridge of iron ore that contains the
current JORC Indicated iron ore Mineral Resource of 9.6 Million tonnes
at 61.1% Fe, 6.0% SiO2, 3.6% Al2O3, 0.08% P (at a cut-off grade of 58%
Fe) to an annualised production rate of 1.5 Mtpa.
Strike is currently targeting the additional capital requirements for
the Stage 2 ramp up to be funded from earlier cashflows generated from
the Stage 1 production exported through Utah Point.
Stage 2 will also involve a scale up in the contracted mining fleet,
expansion of mine site personnel and additional working capital
requirements to facilitate the larger annualised production rate.
Strike is also reviewing its current mining plan with a view to bringing
forward production during CY 2022 at an annualised rate of 2 Mtpa to
maximise early cash flow. These works are ongoing and include both a
revision to the current mining plan and to the related transportation
infrastructure required to facilitate such expansion. Such review is
expected to be finalised in the next quarter.
Stage 2 involves the export of ore through the Port of Ashburton at
Onslow which reduces the trucking distance from mine to Port by
approximately 365 kilometres.
Port of Ashburton
The Port of Ashburton is a common user facility initially constructed
for the Wheatstone Project and was recently transferred by Chevron to
the control of the PPA.
The Port of Ashburton is located approximately 12 kilometres southwest
from the town of Onslow and is approximately 235 kilometres from
Paulsens East.
After consultation with the PPA regarding Strike’s export requirements,
the Port of Ashburton has been selected as the preferred Port for Stage
2 Production of iron ore from Paulsens East post Utah Point.
The Port of Ashburton reduces the trucking distance by approximately 365
kilometres from Paulsens East compared with Utah Point, leading to
significantly improved Project economics.
PPA has confirmed the use of the Port of Ashburton for export of iron
ore by Strike subject to environmental permitting requirements and Port
operation approvals being obtained by Strike, which are currently
underway.
The utilisation of the Port of Ashburton will be subject to normal
commercial terms offered by the PPA for the use of Port facilities.
Loading of ore will be through transhipment operations with Strike
expected to shortly finalise the terms of a transhipping contract with a
transhipment operator.
Strike also confirms it has lodged a Miscellaneous Licence application
for an area close to the Port of Ashburton to be used as a staging area
for iron ore stockpiles prior to ship loading at the Port of Ashburton.
William Johnson, Managing Director:
Strike has revised its mining ramp up plan for Paulsens East, to
minimise up-front capital costs and accelerate the commencement of
production. This new plan provides for production growth during CY2022
to be potentially funded from early-sales cashflow, reducing the need
for dilutive capital raisings. A Final Investment Decision by the
Company on the Project is expected shortly. |