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WPG Resources To Deliver Giffen Well Iron Ore Project Study This Quarter

WPG Resources (ASX:WPG) is on track to complete a $3 million Pre-Feasibility Study to develop the Giffen Well iron ore project in South Australia during the current quarter.

The project will consist of an open pit iron ore mine and magnetite concentrator at Giffen Well, an open pit coal mine and power station at Penrhyn.

Giffen Well can support a 30 year project life.

Bob Duffin, WPG's executive chairman said he was pleased with the results of the PFS work.

"There is little doubt that the project is technically feasible. We are now focussing on optimising the cost estimates.

I'm confident that the operating costs will be broadly in line with our published estimates for Peculiar Knob, which we sold as part of a package of assets to OneSteel Limited (now Arrium) for approximately $320 million in 2011, and which is now in production".

It is envisaged the power station will supply low cost energy to the iron ore operation, local services and infrastructure, a rail spur line that will connect to the Central Australian line near the Carnes siding, and the construction of rail receival, storage and outloading facilities on the Company's land at Port Pirie.

The viability of the project is enhanced by WPG's ability to take advantage of its own strategic assets in energy and port access to create an economical, integrated project.

Duffin said, "We have further work to do on the capital cost, but we expect this to be in the order of $300 million per annual tonne of iron ore concentrate. There is scope to make major reductions in the capital expenditure budget by outsourcing the power station and Port Pirie facilities to service providers, but our base case assumes all fixed assets are funded and operated by WPG".

"These estimates will be fine-tuned as the PFS approaches completion later this quarter", he said.

Duffin also said that unit revenues from Giffen Well would be higher than for Peculiar Knob, because of the higher Fe grade and lower levels of impurities.

WPG has the right to earn an 82% interest in the Giffen Well tenement and potentially a 100% interest.

Project scope

The integrated project has been designed to meet the capacity of existing infrastructure which has positive ramifications for capital expenditure and help make the project's development more affordable.

Giffen Well plans to mine thirteen million tonnes per annum of magnetite iron ore to produce five million tonnes per annum of 68.5% Fe concentrate with low levels of impurities.

The plant will also produce a haematite concentrate in early years while the oxide zone is mined.

The colliery will produce 400,000 tonnes per annum of sub-bituminous black coal that will be fed to a 90-100 MW mine mouth power station that will produce low cost electric power for use at Giffen Well.

In December 2012 the South Australian government renewed the term of the Giffen Well tenement for a further period of three years.

The government has also renewed the period for which WPG's rights to complete development of its Port Pirie assets applies, which now extends to August 2015.

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