Posted on 19 Feb 2021
Australian iron ore producer Fortescue Metals' 22mn t/yr Iron Bridge magnetite project has suffered another cost blowout, to $3bn from $2.6bn previously, and been delayed by six months to the second half of 2022.
The new cost and production timetable is subject to validation through further technical and commercial assessment, Fortescue said today.
The cost blowout and time delay led to the resignation of Fortescue's chief operating officer Greg Lilleyman and two other key project executives this week because of a communication breakdown. Fortescue has appointed Derek Brown as acting director of projects to lead the team to oversee the completion of Iron Bridge. That team includes three new executives, including two that Fortescue has bought over from its Eliwana iron ore mine, which shipped first ore in December.
The Iron Bridge joint venture spent $1.1bn on the project in Western Australia (WA) between April 2019 and 31 January 2021, Fortescue said.
Fortescue owns 60pc of Iron Bridge, with the remainder held by a subsidiary of Chinese state-controlled Baosteel and Taiwan's Formosa Plastics. Formosa has previously committed to buying up to 3mn t/yr of iron ore at market prices to supply the 7mn t/yr Ha Tinh steel mill it is building in Vietnam.
Under the original plans, Iron Bridge concentrate was expected contain 67pc Fe, 0.24pc alumina, 5.6pc silica and 0.01pc phosphorous. It was projected to cost $45-55/t to produce on an all-in sustaining cost basis, which comprises a C1 cash cost of $30-35/t and sustaining capital expenditure of $4-6/t, as well as royalties, administration and freight costs. Fortescue did not provide an update on expected operating costs following the review.
Magnetite projects have had a difficult history in Australia.
The three major magnetite projects already operating in the country are Chinese firm Citic's 24mn t/yr capacity Sino Iron operation, fellow Chinese firm Ansteel's 8mn t/yr Karara iron ore project in the Midwest region of WA and Australian independent Grange Resources' 2mn t/yr Savage River concentrate and pellet plant in Tasmania. The two most recent projects, Sino Iron and Karara, have faced significant delays and cost blowouts and taken several years to raise output.
Karara first made a cash profit in October-December 2017, having started production in 2011. Sino Iron is now making a profit, but only because of strong iron ore prices and is still not necessarily sustainable in the long term, according to owner Citic. Savage River is also profitable at current iron ore prices.
Argus last assessed the ICX price for 62pc Fe at $165.25/dry metric tonne (dmt), down slightly from a peak of $175.40/dmt on 21 December but up from $121.75/dmt on 17 August.
Source:Argus
