Aztec flags cost overrun at Koolan mine
April 24, 2006 - 1:54PM
http://www.smh.com.au/news/Business...-at-Koolan-mine/2006/04/24/1145730850042.html
Aspiring iron ore miner Aztec Resources says the cost of developing its mine in north-west Western Australia has increased by nearly 10 per cent and has also flagged a potential delay.
At a signing ceremony with native claimants at the historic mine site, about 100 kilometres north of Derby, chairman Ian Burston said there was a possibility the mine would not meet its first production target in December.
"If our luck holds we will be comfortable but failing that it could run into the New Year but I think January or February at the latest," Mr Burston said.
"There is a few wobbly knees about that but that is our intention and we will be doing the best we can to meet this."
He also said that product had overrun cost estimates of $108 million by nine million dollars due to rising material costs.
"We are pretty comfortable with it all," he said.
"We are still financing certain negotiations on financial packages."
Koolan Island was previously mined by BHP Billiton with Aztec picking up the project in 2000.
The deposit is one of Australia's highest grade deposits containing 67 per cent of iron ore compared to the 63.2 per cent at BHP Billiton's Mt Newman mine and the 63.1 per cent at Rio Tinto's Hammersley mine.
The high quality of the iron ore means it is in strong demand and Aztec has already signed deals with four Chinese and Japanese steel mills for all the iron ore after being approached by 46 buyers.
"We are at the stage where we have had a number of buyers on the island and we are discussing the type of material we will provide them with for metallurgical testing and that won't happen until maybe the end of April, maybe the end of May," Mr Burston said.
"On the assumption that that is satisfactory to the steel makers the total production for the life of the mine is already sold."
He is also waiting on the outcome of the current round of negotiations between iron ore producers and steel mills to set the benchmark price for the Japanese financial year which started this month.
Last year steel mills were forced to accept a 71.5 per cent price hike and this year another smaller increase of between 10 and 15 per cent is tipped.
"I reckon between 10 or 12 (per cent) is most likely," he said.
The Perth based company still has to finalise the financing of the project, which is considerably lower than many other iron ore projects planned in Western Australia.
"The money is there to build the project we just need to do a little bit about ensuring we have working capital," he said.
As the deposit is located on an island the development sidesteps the need for constructing an expensive railway line and only needs to build a jetty which is due to start this week.