Everybody Needs Good Neighbours
When considering developing an iron ore project in the Pilbara region of Western Australia the first thing you should do is make sure you can move it.
When BC Iron managing director Mike Young joined the company the one factor that stood out most for him was how close it was to the railway infrastructure of Fortescue Metals Group.
“I saw a map of the Pilbara showing Port Hedland, Newman and all the iron ore deposits in north Western Australia,” Young told The Inside Story.
“When I first saw that map back in 2006, just on four years ago, the first thing I noticed was the proximity of the FMG infrastructure.
“That was the very first thing to attract my attention. Not the geology, not anything else.”
Since then it has been full speed ahead for BC Iron with the company having commenced mining in October putting it on track for its first shipment of iron ore through Port Hedland in December.
The major focus for the company has always been, from its first drill hole on April 10 2007 and first assays received in May that year, on getting its Nullagine iron ore project into production.
“It’s one thing that you that you go out and drill a lot of holes to get a lot of tonnes but if you haven’t got an avenue to port then why spend time and money defining a resource you’ll never move?” Young said.
“We have done the opposite. We drilled enough to get a mine going and we haven’t in fill drilled our other deposits.
“The key thing we did was, back in 2006 when we listed, we called FMG and we have had a good relationship with them ever since.”
The Nullagine iron ore joint Venture (BC Iron 50% : FMG 50%) is targeting production of one million tonnes of iron ore by June 30 2011 and everything seems to be on track for that.
The company recently announced the commencement of mining infrastructure construction at the JV following the granting of all approvals for the project by the WA Department of Mines and Petroleum.
The approvals comprise the Project Management Plan, the Mining Proposal and the Clearing Permit allowing work to commence on construction of a new 55 kilometre haul road running from the mine site to FMG’s Christmas Creek ore processing facility.
“When you do a mining project there are three permits that you have to get,’ Young explained.
“One is called the Project Management Plan and that is to do with safety and the environment and the really high-level matters.
“It looks at aspects of how you are going to manage the project rather than say, where your operations are going to go.
“Then you get the Mining Proposal: that’s when you demonstrate how you are going to mine the project; you are going to build this type of road and this is where it is going to go.
“Then to do the actual mining you have to obtain a Clearing Permit – that’s the environmental branch.
“Sometimes it goes to the Environment Protection Authority, if it is a big project or is in a sensitive area. Ours didn’t go up to the EPA it stayed within the mines department as it a low impact project.”
The last aspect BC Iron had to negotiate was getting what is called a Section 18 with the local Nyiyaparli people on the southern part of its proposed haul road.
“That’s been done now. We have met with them and now have approval to put in a Section 18 to disturb the site so everything is done,” Young said.
“All the final hurdles have been cleared and now all that remains is a race against time to achieve the one million tonnes before June.”
Looking at the location of the Nullagine JV would make some people ask why BC Iron has elected to construct its own haul road instead of using the nearby public access highway.
Young explained the reason for this is the vehicles the company will be using to move its ore from the mine to the Christmas Creek OPF.
“It seems a bit of a waste that we are not going to the trouble of paving the public road but the vehicles we are using on this road are different to say the least,” he said.
“A normal road train that you would use to haul iron ore on a public road carries 75 tonnes of ore.
“These carry 360 tonnes. They are big machines. Four trailers: one of which has its own engine. They are called Power Trans.
“They’re not what you consider ‘street legal’ so we are building this special purpose haul road. The road design has been reviewed and improved to ensure sustained haulage for the life of the project.”
BC Iron expects to become cash positive by around April 2011, which means by June the project should deliver $30 – $40 million free cash, which will be split half and half between the JV partners.
“That’s when we will really start to ramp up production,” Young said.
“Within six months we should, hopefully, be fully operational with a fully completed haul road and with everything going well we should be at full production.”
BC Iron’s achievement at Nullagine has been one of the fastest discovery to mine stories to be told in the Pilbara.
The question being asked by everybody now is what’s next for the company?
“We’ve got a business development that has been constantly reviewing projects,” Young said.
“We’ve looked at projects within the Pilbara, within Australia and outside Australia. That is our order of priority.
“One thing we want to do is work to our strengths, which are our relationship with the state government, with the Aboriginal people and the credibility and, basically, the good name that we have with all the stakeholders.
“We want to leverage of that so what you do first is obviously look within the Pilbara.”
Young is also eager to point out the first mover advantage the company has with FMG having been the first junior in the region to enter discussions with its larger neighbour over three and a half, almost four, years ago regarding third party access.
“In the early days we were a political weapon in their fight for third party access as they demonstrating their willingness in allowing third party access to their railway,” Young said.
“As we moved towards feasibility and the test pit they came to realise that yes, we did have a real project and that we could enter into a real joint venture with them.
“It is the politics of infrastructure that is really critical and that is what we have really come to understand.
“Jumping onto somebody else’s infrastructure is just so much simpler and delivers results so much quicker.
“A lot people who weren’t so complimentary a year ago when we did the deal with FMG are now a bit more pragmatic having spent that time trying to obtain their own third party access deals.”
BC Iron – The Short Story
15 Rheola Street
West Perth WA 6005
Ph: +61 8 6311 3400
Fax: +61 8 6311 3449
Tony Kiernan, Mike Young, Morgan Ball, Terry Ransted, Steven Chadwick, Glenn Baldwin
Consolidated Minerals 22.7%
Regent Pacific Group 16.2%
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