PERTH (miningweekly.com) – Iron-ore miner Atlas Iron has approved the development of its Corunna Downs project, in the Pilbara, with capital costs estimated at between A$47-million and A$53-million.

A definitive feasibility study estimated that the project had the potential to deliver four-million tonnes a year of lumps and fines direct shipping ore over an initial five- to six-year mine life.

C1 costs for the project have been estimated at between A$37/t and A$43/t, with full cash costs forecast at between A$49/t and A$55/t.

First ore from Corunna Downs is now expected to be shipped in the March 2018 quarter.

The company’s lenders have agreed to amend the terms of an existing loan, enabling the project to be funded from operating cash flows.

“This is a strong vote of confidence in Atlas by our lenders, several of whom are significant Atlas shareholders,” said Atlas MD Cliff Lawrenson.

“Corunna Downs, together with Mount Webber, will build our production rate of approximately 12-million tonnes a year after Wodgina and Abydos cease production in the first and second half of 2017 respectively.”

He noted that the amendments to the current loan facility will enable Atlas to capitalise on current and future opportunities provided by the stronger iron-ore price.

The amendments to the Term Loan B facility will allow Atlas to accumulate up to a further $45-million in cash generated, and the funds will not be subject to the cash sweep through to the end of June 2018.

After each of the March, June and September quarters of this year, Atlas will be entitled to transfer cash on hand in excess of A$80-million into a dedicated reserve account, subject to a cap of A$20-million a quarter and A$45-million in aggregate.

Cash on hand in excess of these limits will still be paid to the lenders to reduce the loan balance.

As consideration for the amendments, Atlas will commit to paying all of its Term Loan B interest in cash, and will issue ordinary shares valued at A$5-million, to support the Term Loan B lenders.

The Term Loan B principal outstanding will also be increased by A$3-million, unless the facility is refinanced or repaid within 120 days of satisfying the conditions precedent.