Grange mine to generate $22b in revenue

Grange mine to generate $22b in revenue

Junior iron ore developer Grange Resources Ltd’s flagship Southdown project will generate more than $22 billion in total revenue with construction of the mine due to start next year.

Netherlands-based chairman Anthony Bohnenn said the magnetite deposit would cost $1.6 billion ($US1.2 billion) to develop and the company was now looking for a joint venture partner to shoulder the entire development cost.

More than 20 international companies, including trading houses and steel makers, have registered interest in being involved in the project, located in the south of Western Australia.

Based on conservative iron ore prices, about 40 per cent lower than current levels, the mine would make a net profit of between $5 billion and $6 billion over the entire 22-year mine life.

“But that is likely to be more than 25 years,” Mr Bohnenn said.

“The exciting thing is the quality of the ore is so good.”

Mr Bohnenn said Grange would sell down its interest to between 40 and 50 per cent in exchange for the project being fully funded by joint venture partner.

Grange plans to build a 105 kilometre slurry pipeline from the mine to the port at Albany, shipping 6.6 million tonnes of ore up to a pelletising plant in Malaysia.

The pellets will sell for a premium on the world market as no coking coal needs to be used to make the final product – steel.

Brazilian miner CVRD currently monopolises the southeast Asian pellet market and Grange is confident its pellets will be cheaper for customers.

Mr Bohnenn, a former investment banker, said the iron ore price would remain very strong for the next two years with China continuing to be the driving force.

The project is based on half of a deposit split down the middle by a road with Rio Tinto holding the other half.

Mr Bohnenn said Rio Tinto was keen to hold the entire deposit, but Grange had quietly picked up the exploration licence two months before Rio moved on it.

“My dream is to get to have and mine Rio’s half too,” Mr Bohnenn said.

Construction of the project is due to start next year with first production expected in mid-2010.

Grange shares closed five cents stronger at $1.35 on Friday.

© 2006 AAP

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