New scoping at Paulsens East shows Utah Point results

9th April 2020 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – A revised scoping study into the Paulsens East iron-ore project, in Western Australia, incorporating the Utah Point, at Port Hedland, as the shipping port, has confirmed the project economics.

The original scoping study completed in late 2019, considered the Onslow marine supply base, at Beadon Creek as the preferred port for export. However, since the original scoping study was completed, Strike Resources undertook a trade-off study looking at the suitability of alternate port locations from which to ship, identifying Utah Point as the most suitable point for exports.

The incorporation of Utah Point as the port for export has reduced the estimated pre-production capital cost from A$12-million to A$8.2-million, while the payback period has increased slightly from two months to three months.

Based on the production rate of 1.5-million tonnes a year, and a mine life of four years, the updated scoping study estimated life-of-mine (LoM)  revenues of A$803-million, a net present value (NPV) of A$123-million and an internal rate of return (IRR) of 551%.

This compared with the original NPV of A$155-million and an IRR of 449%, with LoM revenues originally estimated at A$793-million.

Average C1 cash costs have also increased from the original A$45/t to A$79.6/t.

Under the revised scoping study, ore will now be trucked from the mine to Utah Point, predominantly by sealed road, where it will be stockpiled prior to loading directly into ocean going vessels for export to customers.

Strike MD William Johnson said that the availability of suitable capacity at Utah Point provided the company with a choice of logistics solutions for Paulsens East, further de-risking the project.

“The mine to port logistics chain for Utah Point is much simpler than for Onslow, with less double handling of ore and no transshipment required. Being already an established multi-user iron-ore export port with available capacity and existing ship-loading facilities provides further advantages.”

Strike told shareholders on Thursday that the company is targeting a development timetable for production to start in the fourth quarter of this year, however, this timetable could be impacted by market conditions and the Covid-19 pandemic.

“The continued strength of the iron-ore price together with the weaker Australian dollar further contribute to the robust economics of the project, which are driven principally by the high-quality nature of the iron-ore contained within the deposit and the low life of mine strip ratio,” Johnson said.

“The project has the potential to generate very significant cashflows for the company over an initial four year mine life in comparison to market capitalisation of only A$6-million, with a relatively low capital cost requirement.

“Furthermore, the project has additional upside potential with opportunities identified to increase the production rate, extend the mine life, improve iron-ore grades and further reduce costs, all of which will be examined as part of further studies.”