Fortescue Metals $US1.27b Eliwana mine gets approval - 1,900 jobs

Posted: 25th Jun

Fortescue Metals Group will spend $US1.27 billion building a new iron ore mine in Western Australia, in the first of three possible mine approvals in the iron ore sector this year.

Dubbed Eliwana, the new mine will replace the Firetail mine which is close to the end of its life, and is a key plank in Fortescue's plan to increase the average grade of its iron ore.

Fortescue said first ore from Eliwana would come before the end of 2020, and would "underpin" the introduction of a new "premium" product with 60 per cent iron content in fiscal 2019.

Fortescue currently produces a range of products with iron content between 56 per cent and 59 per cent, but those products have been attracting wider price discounts in recent times as China seeks higher grade raw materials.

Spending on Eliwana will begin in fiscal 2019, with the biggest chunk being spent in fiscal 2020, and Fortescue said the project would create 1900 jobs during construction.

The development will be part of a development blitz in Western Australia's iron ore heartland, which could see more than $US5 billion spent building new mines over the next three or four years.

But unlike the mines built during the mining boom, these new mines will replace depleted mines, rather than grow export volumes.

The BHP board is expected to approve development of the $US3 billion South Flank iron ore mine within months, while Rio Tinto may also approve development of the new $US2.2 billion Koodaideri mine before the end of 2018.

Some analysts have speculated that Fortescue's plan to increase iron grades will force it to either reduce export volumes or increase unit costs.

Fortescue chief executive Elizabeth Gaines indicated on Monday that reduced export volumes were not on the cards.

"Development of the Eliwana project will maintain Fortescue's low cost status, providing us with greater flexibility to capitalise on market dynamics while maintaining a minimum 170 million tonnes per annum production rate over 20 years," she said in a statement.

Eliwana is located west of Fortescue's Solomon Hub operations, and was selected for development over the Nyidinghu deposit which is closer to Fortescue's original operations in the Chichester Ranges.

The $US1.275 billion project will include 143 kilometres of new railway, with the mine expected to produce 30 million tonnes per year on average over its life.

In a submission to Western Australian environment regulators last year, Fortescue said infrastructure linked to Eliwana would be built to handle up to 50 million tonnes per year in a bid to cater for peaks in the annual production rates.

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Source: Financial Review -