“Assuming the 2005-06 benchmark prices for Australian iron ore, Fortescue estimates that it would realise a selling price of $A46.50 per wet tonne of its planned product, FOB, Port Hedland (net of government royalties),” the company said.
“With the total estimated production cost of $A16.11/t, Fortescue would generate an EBITDA margin of approximately $A30/t. Based on a production target of 45 million tonnes per annum, this would translate into EBITDA earnings of $A1.3 billion.”
FMG conceded future iron ore prices would vary from current levels but said “these robust economics will deliver a favourable financing outcome to shareholders”
FMG executive director Graeme Rowley told MiningNews.net financing was progressing and the project was now fully complete for any potential financiers to conduct due diligence.
“We now have what I call the last knot in the bow,” Rowley said.
“We now have the mining BFS complete so that any future equity partner will be able to complete due diligence with the support of the banks, and determine as a result of that whether they want to be part of the future or not.
“At the same time, we’re developing all the necessary work so that once the equity part is sorted out we can go straight into the debt.”
Snowden has estimated the production rate of 45Mtpa will be ramped up within 15 months of the first ore shipment, and has calculated a mine life in excess of 20 years is achievable based on the current 1.1 billion tonne reserve base.
The study has been developed for FMG’s first flagship deposits at Cloud Break and Christmas Creek and includes a comprehensive mine plan and schedule.
FMG said due to the substantial investment undertaken to establish its port and rail infrastructure base, the company’s medium-term production schedule is already planning to expand from 45Mtpa to 60Mtpa “as soon as operations allow”
“The infrastructure will be built capable of taking 60Mtpa, the additional effort will be required to ensure that we’ve got port capacity and obviously improve the mining capacity to that level,” Rowley said.
“During the first three years of operation, we’ll be looking very closely at the future growth, demands and putting in place the plans that are going to give us the expansion required.
“What’s driving this is that there is no indication whatsoever the demand for iron ore is going to drop off.”
Life of mine cash operating costs for Cloud Break have been estimated at $6.26/t, while operating costs for Christmas Creek have been estimated at $7.78/t, taking the average over the whole project to $7.06/t.
Last week, FMG released results from a control estimate for the rail and port component for the project, which demonstrated a $1.92 billion capital cost would be required, a $90 million increase on the figure announced in a definitive feasibility study in August 2005.
First production from the $2.5 billion project has been flagged for 2008.
Shares in FMG were up 6c (1%) to $6.23 in morning trade.
