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Centrex Metals: DFS underway at Fusion Iron Magnetite Project after promising Scoping Study results

Centrex Metals (ASX: CXM) has commenced a Definitive Feasibility Study (NYSE:DFS) at the Fusion Magnetite Iron Project and associated Port Spencer in South Australia after completing a Scoping Study.

Centrex managing director Jim White told Proactive Investors today that the indicative costs and capital requirements for the project had given the two companies the confidence to progress the project.

"The scoping study results have convinced us and our partner to spend another $45 million on a full feasibility study," White said.

Baseline and approval studies are already underway for the A$45 million DFS, which is targeted for completion in early 2013. Other work includes detailed test work studies, Resource modelling and mining design.

"The resource definition's probably the biggest single component but then there are a range of option studies to be completed and a range of evaluations of alternative strategies, like contracting strategies," White told Proactive Investors.

"The whole study's been done on the basis of owner operated and we need to test that and make sure that that's the best way to go and it's likely that there will be some contracting options that we want to consider."

White told Proactive Investors that the joint venture, and in particular WISCO, has its sights set on production in 2015.

"Our joint venture partner is really keen to make 2015 the production goal. That target is aggressive, but it's doable," he said.

The DFS follows the recently completed Scoping Study which highlighted the prospectivity of the Fusion Project.

Both the DFS and the Scoping Study assumed production of between 5 million tonnes and 10 million tonnes per annum.

Based on these figures, the Scoping Study indicates that Fusion could have free on board operating costs including royalties and the port of between A$65 and A$71 per tonne, and require capital investment including port facilities of between A$1.7 billion and A$2.6 billion.

White said these costs would likely be refined as the DFS progresses.

"As we develop a resource base, the certainty around those costs will improve," he said.

A large scale, 108,000 metre drilling program comprising infill and expansion drilling is underway at Fusion, with the aim of increasing the resource base across the product and establishing a Probable Ore Reserve.

Fusion hosts an Inferred Resource of 454 million tonnes of iron, with an additional 200 million tonnes to 400 million tonnes in Exploration Targets over three deposits. To date an Inferred Resource has not been established for the project.

Centrex is actively developing magnetite mines on its extensive tenements on the Eyre Peninsula in South Australia and a port in conjunction with its Chinese partner, Wuhan Iron and Steel Co Ltd (WISCO).

The company holds a 40% interest in Fusion and a 50% interest in Port Spencer under two joint ventures, both with WISCO.

Fusion project

Fusion is located about 35 kilometres north of Port Lincoln on the southern Eyre Peninsula in South Australia.

The project comprises a number of prospective magnetite deposits within a 50 kilometre magnetic banded iron formation.

A high grade iron concentrate product is able to be produced at a relatively coarse grind size of 75 microns. Production from Fusion is planned to be transported via a slurry pipeline to Port Spencer for export.

Port Spencer

Centrex is developing the Port Spencer facility to serve as the export facility for production from Fusion.

White told Proactive Investors today that the port set Centrex apart from many other companies.

"That's a big difference between us and many others, that we really do have our route to market sorted out and we have good costings on building and operating the port," he said.

"The thing about the port is that it's 500 metres into 20 metres of water with no dredging and that means that we can directly load cape ships up to 200,000 tonnes on any tide, so that's a very economical solution to the port problem."

In addition to production from Fusion, Port Spencer will handle Bungalow magnetic concentrates and haematite lumps and fines produced from Centrex's 100% owned Wilgerup project.

It also has applications exporting local agricultural products that are produced along the Eyre Peninsula.

However, White said Centrex will be able to fund the port entirely within the scope of the project, meaning that the company will not have to rely on third party use of the port to make it viable.

"That's held up a lot of port developments, having to get a number of companies to commit, and we're not faced with that dilemma so that's why the port's good," White said.

"It doesn't require others to make sure that it happens but it'll be great if they come along.

"That further improves either our revenue position or our cost base."

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