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Murchison Metals: Crosslands and OPR feasibility studies indicate viability

Murchison Metals (ASX: MMX) has released the highly anticipated Feasibility Studies for the Crosslands and Oakajee Port and Rail (OPR) projects.

The studies have indicated commercial, technical and operational viability, subject to OPR reaching agreement with potential foundation customers.

Trevor Matthews, chief operating officer of Murchison Metals, said “The delivery of these studies by Crosslands and OPR represents a significant milestone in the ongoing development of the mid-west as a major iron ore producing region, and Murchison looks forward to progressing both projects to the next stage of development."

The results reflect nearly four years of work and over A$400 million of expenditure by the respective project teams.

 

Crosslands’ feasibility study on the Jack Hills Expansion Project (JHEP) is based on:

- Average production of 23.4 million wet tonnes per annum (Mwtpa) for the first 10 years, comprising 22 Mwtpa of high purity iron concentrate products and 1.35 Mwtpa of direct ship products (DSO), with a total estimated mine life of 39 years, supplying the key Chinese, Japanese and Korean markets;
- Average operating costs of approximately A$33.66 per wet tonne (wt) of product, excluding royalties and before infrastructure charges; and
- Capital cost of A$3.7 billion, inclusive of owners’ costs during construction (A$254 million).

 

OPR’s feasibility study is based on:

- Development of an integrated port and rail supply chain with engineered capacity of 45 Mwtpa, with a planned contracted throughput of 42 Mwtpa;
- Average operating costs of A$5.45/wt of throughput;
- Capital cost of A$5.94 billion, inclusive of owners’ costs during construction (A$508 million); and
- Direct capital costs (before owners’ costs) of A$5.43 billion, versus A$5.24 billion for November 2010 Budget and Engineering indicative estimate (before owners’ costs).

Murchison added that the material approvals for both projects are well advanced, while the Supply Chain Agreement (SCA) process between OPR and its potential foundation customers is incomplete, Murchison expects that all parties will ultimately reach agreement around commercial arrangements.

The studies assume Project Go Ahead in the March Quarter 2012 with first shipping through Oakajee targeted for 2015.

Murchison considers that this schedule is dependent on the timing of completion of SCAs and related milestones, with the company continuing to review funding options and opportunities.

Murchison will now continue with a strategic review post the release of theses Feasibility Studies.

Murchison’s 50:50 joint venture partner in Crosslands and OPR is Mitsubishi Development Pty Ltd.