Any new mining project is directly
related to the question of logistics, particularly when it is
located in somewhere as vast as Australia.
Among the new projects in the
country, Minemakers Ltd, an Australian mining company, plans to
mine 9.74m. tonnes of phosphate in the first five years of
operations at its Wonarah phosphate project in the Northern
Territory of Australia. The first stage, with a production
capacity of 500,000 tpa, is expected to start up in H2 2011,
before expanding to 3m. tpa in 2012.
The project being located in an
unexploited area, one of the main concern of the company is to
sort out how it will transport its raw material to the port of
Darwin, from where it would mainly been shipped to fertiliser
manufacturers in Asia.
Minemakers’ new railway will connect the
Adelaide-to-Darwin railway (pictured) to transport
its phosphate
The Perth-based group has therefore completed a direct shipping
ore (DSO) feasibility study of the project, estimating capital
expenditure at $215.5m., including a rail transport hub and
port facilities in Darwin.
“At this stage DSO production
still forms part of our overall development plan. However, this
will be reviewed as part of the feasibility for the larger
project,” Neville Bergin, Minemakers’ general manager
for projects development, told IM.
“A decision on the timing and
magnitude of DSO production is likely to be driven by this
strategic investors requirements for product,” he
added.
In July, Minemakers signed a
memorandum of understanding (MOU) with Verte, an Australian
registered financial advisory firm with strong connections to
Asia. Under the terms of the MOU, Verte will seek strategic
Asian investors who will provide equity funding by subscribing
for newly issued Minemakers shares at a significant premium to
the current share price.
On completion of these, strategic
investors will own up to 50% of Minemakers and purchase 100% of
the production of Wonarah at market prices.
The same investors will provide
funding for the construction of a very large project at Wonarah
including a beneficiation plant, phosphoric acid plant, gas
pipelines, transport hub at Tennant Creek if required, and
storage facilities at the port of Darwin. The company could
also add a fertiliser plant and a potentially specialist
phosphorus chemical plant in addition to the planned railway to
transport the material.
The rail plans
The general idea for Minemakers is to take the shortest route
between Wonarah and the Adelaide-to-Darwin railway, a distance
of approximately 240 km, to transport its phosphate (see
map).
Although the route has still not
been surveyed, the company knows that the terrain is generally
flat.
“There will undoubtedly have
to be some deviation from a straight line to accommodate
terrain, outstation communities and sacred sites. However, we
do not expect any major engineering obstacles,” Bergin
explained.
According to Minemakers, the
standard of construction would be technically similar to the
existing Adelaide-to-Darwin rail: 23 tonne axle load, 115 km/h
maximum operating speed, built using 50kg rail and 2.4 metre
concrete sleepers spaced at 720 mm.
The link between Alice Springs and
Darwin was constructed between 2001 and 2003. The first freight
train arrived in Darwin on 17 January 2004 and the first
passenger train (the Ghan) arrived on the 4 February 2004.
The line carries a mixture of
freight including bulk commodities such as iron ore, manganese
and copper concentrate, containerised freight and
passengers.
The survey and engineering
assessment having not been completed yet, it is still difficult
to put an exact figure on the final cost of the project. But
given the flat terrain and the construction specification
contemplated, the company expects a cost of between A$1.5m.
($1.46m.) and A$2m. ($1.95)/km, which would bring it to a total
of A$360-480m. for the whole railway.
Depending upon which components of
the broad conceptual plan are included in the final implemented
project, the total cost of the Wonorah project is likely to lie
between A$3bn and A$6bn.
Bergin revealed to
IM that, if strategic Asian investors will
finance the construction, the railway will still be owned by
Minemakers. The company would however have to engage a
contractor with the appropriate licence to operate the railway
on its behalf as Australian law requires a rail operator’s
licence to operate a railway. The company would still require a
road haulage contractor for the DSO phase of operation.
At the beginning of last year, an
arrangement with Australian Transport and Energy Corridor Ltd
(ATEC) covered the preparation of a desktop study into the
feasibility of building a railway line between Wonarah and the
Adelaide to Darwin railway. This study was completed in July
2009.
“Looking at the results from
the perspective off a rail operator it did not look like an
attractive proposition based on the tonnages then forecast to
be produced by Wonarah,” Bergin said.
“However, from the perspective
of a miner looking to reduce the cost of haulage overall it was
an attractive project, assuming that the capital could be
raised to build the railway line. With the recent deal with
Verte to bring Asian investors into Minemakers and to fund all
of the capital required for a much larger project than
previously proposed, the construction of a railway is now very
much back on the table,” he added.
The time factor
Minemakers has been working on the Wonarah project for a number
of years already and it will still take a minimum of three
years before the company can finalise the railway. Originally
planned for 2012, it is expected between Q4 2013 and Q1
2014.
“In the short term, the plan
is to provide would-be Asian investors with the information
that they require in order to complete their due diligence
prior to making their investment decision. Once the new
investors are on board, then we expect to go through a
feasibility study of the enlarged project and this of course
will include the railway line,” Bergin explained.
The feasibility study will include
a survey of the preferred route, an engineering assessment and
costing together with discussions with the Central Land Council
(CLC), traditional owners and landowners. In the meantime,
Minemakers will submit a Notice of Intent (NOI), which in the
Northern Territory triggers the start of an environmental
assessment process.
Bergin underlines that the
commencement of the survey is unlikely to occur before the
strategic Asian investors have concluded their equity
investment in Minemakers.
The company plans to use an
airborne technique such as Light Detection And Ranging (LiDAR),
an optical remote sensing technology that measures properties
of scattered light to find range and/or other information of a
distant target, to undertake the survey.
Timing depends very much on the
availability of suitable survey aircraft. The actual survey can
usually be flown in a few days but the data-processing and map
production can take several weeks.
The construction of the railway
should not be too complicated as the field is quite flat based
on the data collected and as the Wonarah mine site is not
likely to raise significant environmental issues.
In addition, the company hopes
“to build on existing good relationship with the CLC and
Traditional Owners at Wonarah to reach an early agreement on an
acceptable alignment for the railway”.
But “time is the real
challenge with this project,” Bergin said.
Minemakers still has to do a lot of
work in terms of survey, engineering assessment, design and
costing, environmental survey, assessment and engagement in the
environmental assessment process as well as a high degree of
consultation with landowners, CLC and Traditional Owners in
particular.
Considering experience of similar
undertakings in the Northern Territory from other companies, it
seems it may take up to three years for the project: two years
to get all necessary approvals and consents in place with a
further year required for construction.
However, the trigger for the
commencement of that process will probably be the completion of
the feasibility study that will follow the conclusion of the
Verte deal,” Bergin revealed.
Railway v pipeline
According to Minemakers, the rail has some significant cost
advantages compared to the road as, in the case of the Wonarah
project, a railway would save between $25 and $30/tonne of
product delivered from Tennant Creek to Darwin.
The recently completed feasibility
study for a direct shipping ore (DSO) operation, estimated the
cash cost of DSO at $122/tonne, so a saving of $25-$30/tonne
represents a reduction in unit costs of 20%- 25%.
The initial 3m. tpa capacity of the
railway has been increased since the beginning of discussions
and the project envisaged with the aid of the strategic Asian
investors is very much larger than that originally
contemplated. Initial production of beneficiated rock is likely
to be of the order of 5m. tpa with a capacity to expand to 10m.
tpa.
Bergin explained that some or all
of this production could be directed into a phosphoric acid
plant to be built at the site. The phosphoric acid would then
be railed to Darwin either to be shipped to fertiliser
producers or converted into fertiliser in Darwin where there
are several gas developments that could provide a source of
ammonia necessary for the conversion into the diammonium
phosphate (DAP) or mono ammonium phosphate (MAP).
Minemakers also considered the
pipeline option to transport its phosphate. But while pipelines
have low operating costs, the capital costs are still
relatively high.
According to the company, a
pipeline would cost about 50% to two thirds of the cost of
rail. But the pipe diameter ultimately imposes a maximum
capacity and they are essentially a single user infrastructure
asset, meaning that it would be possible to use it to transport
other minerals.
Based on another company’s
recent study, the capital cost of a pipeline could be expected
to be around A$850,000/km. Operating costs were quoted as being
between $2- $4/tonne.
“But both capital and
operating costs exclude the cost of the slurry preparation
plant at the start of the pipeline and the dewatering plant and
water management facilities required at the discharge,”
Bergin warned.
In addition, the capacity of a
railway can be increased easily, simply by adding more passing
loops and it is available for access by other users; subject to
payment of access fees, to transport other commodities and
cargoes.
An east-west link between Mount Isa in Queensland and
Tennant Creek in the Northern Territory has long been mooted.
The construction of a Wonarah railway joining with the Adelaide
to Darwin railway would provide almost 50% of that connection.
That may be sufficient for others to be motivated to complete
the link to Mount Isa. That connection would relieve the
pressure on the Mount Isa to Townsville line and potentially
change the economics of mineral deposits lying within say a
200km to 300km radius of the railway.
Minemakers transport options
Source: Minemakers Ltd
Minemakers open to sharing rail
Neville Bergin, Minemakers’ general manager for projects
development, explained to IM how the rail
could be used by other mineral producers in the future
IM: What other minerals could use the
railway?
Neville Bergin: There are currently no other producing
mines in the Wonarah area. Indeed the area is under explored
and the lack of access to rail infrastructure may have been a
deciding factor for explorers to spend their exploration
dollars elsewhere. But the development of the Wonarah rail link
is likely to change this.
IM: Would you consider any deal with Legend
which plans to start producing phosphate at Mt Isa from
2013?
NB: The Mount Isa to Townsville railway is understood
to be at or near capacity and in need of significant capital
injection to upgrade it. Closing that gap of about 300 km
between Mount Isa and Wonarah would provide an alternative
route for the export of commodities from the Mount Isa region.
Our railway would have to be open access; that means anyone
else may use it subject to payment of an access fee and
compliance with our train pathing schedule.
So assuming that someone else constructs the link to Mount Isa
than Legend could indeed use our railway. However, Legend is
understood to have already been allocated capacity on the Mount
Isa to Townsville railway.
IM: Have you been inspired by another similar
project?
NB: In short, the answer is no. Given the remote
location of the site we were acutely aware of the costs of
various methods of transport and we quickly concluded that a
railway was our preferred haulage method. However, it is only
the existence of the Adelaide to Darwin railway that makes this
a realistic proposition. A demonstration perhaps that
infrastructure construction is truly a nation building
enterprise through which we are able to realise the economic
potential of the country.