JOHANNESBURG (miningweekly.com) – Plans for a 570-km multiuser railway from the inland city of Andahuaylas in southern Peru to mineral export port San Juan de Marcona, on the west coast of Peru, will significantly improve development prospects for Australia-listed junior Strike Resources’ 20-million-tonne-a-year iron-ore mine.
The company, in the past, has mined and sold small quantities of iron-ore from its Apurimac project – considered one of the world’s highest-grade, large-scale magnetite deposits – but a suitable transport solution has held back large-scale development of the mine.
“The Andahuaylas railway, if its proceeds, will be an absolute game changer for Strike in Peru,” said MD William Johnson on Thursday.
Given the high-grade nature of the iron-ore deposit and the premium pricing that high-grade lump and fines products attracts over concentrate delivered through a slurry pipeline, Strike has always considered a railway line as the best infrastructure solution of the project.
A 2008 Snowden and SKM study, however, determined that a concentrate pipeline was the preferred transport solution for the project, given the high capital cost of building a railway.
In 2010, Ausenco Sandwell undertook further infrastructure studies to compare the economics of slurry concentrate with that of railway infrastructure at two reduced production levels of ten-million tonnes a year and 15-million tonnes a year. In these tradeoff studies, the total average cost of mining, processing and transporting to port ten-million to 15-million tonnes of lump and fines products by a Strike-owned and -operated railway was estimated at about $16.50/t to $14.60/t. A production profile of 20-million tonnes a year should provide even greater operating efficiencies, the company said.
With the falling iron-ore price in recent years, the global investment climate is not supportive of large-scale iron-ore-related infrastructure and Strike has resolved to keep the project costs minimal until market conditions improved.
News of a planned railway line by the Peru government, therefore, is deemed “extremely positive” for the project and comes at a time when iron-ore prices have strengthened from lows of about $40/t in 2015 to about $70/t currently.
Johnson said that the Ministry of Transport and Communications (MOTC) initiative validated the company’s decision to hold on to the project over the last ten years.
The MOTC is to undertake a formal study to build a railway line.