News: Iron Road targets 2015 production

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Transcription of Finance News Network Interview with Iron Road Limited (ASX:IRD) Managing Director, Andrew Stocks



Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from iron ore developer Iron Road  (ASX:IRD) is Managing Director, Andrew Stocks. Andrew welcome back. First up, can you give us an update on your Central Eyre iron project?



Andrew Stocks: Sure the Central Eyre iron project is a very large low-grade magnetite gneiss. It has a resource currently of about 2.1 billion tonnes at a grade of 16.2 per cent iron, and our studies show that we can produce a high quality concentrate of about 67 per cent iron.



Clive Tompkins: So will this be an open cut operation with the ore being mechanically treated?



Andrew Stocks: The operation will certainly be an open cut, very large open cut operation. The way the drilling’s going, I expect the first open cut mine to be about six kilometres long, a bit over a kilometre wide and over half a kilometre deep. Very large open cut mining operation with beneficiation plants onsite.



Clive Tompkins: Thanks Andrew. So what would your costs per tonne be and where will the ore go?



Andrew Stocks: Last year we finished a prefeasibility study examining the project. For the prefeasibility study we constrained the work to look at what was currently in the resource - a two kilometre section of the deposit we called Murphy South. We now believe that deposit is about six kilometres long, so we’re looking at the central third. But that study said that we could produce about 12.5 million tonnes of concentrate per annum for an FOB cost (freight on board cost) of $59 per tonne, plus State royalties. The product we expect to produce from the project, is a very coarse high quality product that we’ll market as a centre blend product, meaning that it can be blended with the direct ship fine material at the steelmaker. The market for this is essentially any blast furnace, but of course the larger market is China and greater Asia.



Clive Tompkins: And where does that put you in terms of cost of production relative to other producers?



Andrew Stocks: I expect the project will be right in the middle of the cost curve. But of course, we also expect we’ll end up with a premium price for our product as well.



Clive Tompkins: So with a 2.1 billion tonne JORC resource estimate, the project is at the bigger end. What are you forecasting in terms of mine life and annual production?



Andrew Stocks: The prefeasibility study that looked at the constrained case, the central third of the deposit we’re looking at the moment, said that we could produce 12.5 million tonnes of concentrate for about 14 years. Looking at the potential of the project, we’re certainly looking at a potential mine life here of over 30 years.



Clive Tompkins: And Andrew, what about adding to the resource? I notice you’ve just completed drilling at Hambidge and the Rob Roy prospects, what has this revealed?



Andrew Stocks: Resource expansion is what we do. The Rob Roy prospect is essentially the eastern extension of the Murphy South, so it’s the two kilometres to the east of the prefeasibility study that we discussed. The Hambidge prospect is as far south as we can go within our tenement area, it’s about 35 kilometres to the south of the main area that we’re working. At Hambidge we drilled four lines of holes over about three kilometres and we’ve been able to publish an exploration target there. The potential of that one deposit there, of about 800 million to a billion tonnes there. So what we’re seeing between Rob Roy and Hambidge is again, consistency in geology, mineralogy and essentially seeing more of the same.



Clive Tompkins: Sounds like you’ll be mining for the next 50 years. What’s the next key milestone for the project?



Andrew Stocks: We will have further resource expansion announcements and we’re also commencing a definitive feasibility study. And that study is a collection of small studies, all looking at different aspects of the project and we’ll be announcing the results of those as they come to hand.



Clive Tompkins: While it’s still early days Andrew, when do you hope a project of this size could move into production?



Andrew Stocks: The prefeasibility study described an open pit operation and beneficiation and building infrastructure, and examined the approvals pathways; and said that we could probably be in production towards the end of 2015 or maybe early 2016. The definitive feasibility study will look at all these aspects in quite a lot more detail and the timeline will fall out of that.



Clive Tompkins: Now to corporate matters. What’s the CAPEX for the project?



Andrew Stocks: The prefeasibility study said that the CAPEX for the project is about $2.6 billion. We’re now examining the whole process in the prefeasibility study - the beneficiation process, but we’re also looking at the infrastructure that’s associated with that. The infrastructure to build that project was included in those costs, but now we’re looking at alternatives. For example, third-party port versus our own facility, but stage one $2.6 billion.



Clive Tompkins: And Andrew, what options are being considered for funding?



Andrew Stocks: Last year we commenced our search for an appropriate partner to help develop the project. We now believe that this project will have a mine life of 30 years or more, so it’s very important that we get the right group on board and we’re taking a very methodical approach to finding the appropriate partner.



Clive Tompkins: You also have projects at Gawler in South Australia and Windarling in WA. What do they contain and what is planned?



Andrew Stocks: Well both of them are iron ore projects. The Gawler iron project is northwest of Tarcoola, I guess one could say right in the middle of South Australia. It has a hematite cap with magnetite underneath and very, very coarse grained, similar in some respects to the mineralogy of the Central Eyre iron project. It doesn’t have nearly the size, but we think that this can be quite a nice project. We’ve completed an RC drilling program there, we’ve completed a diamond drilling program and we’ve done a series of metallurgical test work programs there as well. The Windarling project is in Western Australia, it does look promising but it doesn’t have nearly the size of the other two projects. And so we want to concentrate on the two South Australian projects, so we have a third party earning into the Western Australia project.



Clive Tompkins: Lastly, where would you like to see the Company by year’s end?



Andrew Stocks: We would like to have the definitive feasibility study finished or at least nearing completion. Further resource expansion work as I’ve mentioned. And possibly even publish a reserve, and I look very much forward to providing some clarity on where we’re going with the infrastructure.



Clive Tompkins: Andrew Stocks thanks for the update.



Andrew Stocks: Thank you Clive.



Ends