Dragon Energy has released a scoping study showing potential for early start up, low capital investment and minimal processing at the Pilbara Iron Project close to Rio Tinto Tom Price and Paraburdoo iron ore mines.

The Pilbara Iron Project comprises two projects, Rocklea and Nameless. Two development scenarios were investigated in the Scoping Study undertaken by GHD Limited with Case 1 offering 2 million tonnes per annum production from just Rocklea while Case 2 covers production of 10 million tonnes per annum from Rocklea and Nameless.

The Scoping Study indicates technical and financial viability for the project in both development cases. Importantly an initial review of environmental, regulatory and approval processes has not identified any significant impediments to project development.

Mining and transportation costs in Case 1 indicate free on board operating expenditure of USD 45.82 per tonne and cost and freight of USD 64.89 per tonne. Case 2 presents free on board operating expenditure of USD 33.59 per tonne and cost and freight of USD 50.15 per tonne.

Net present values were USD 344.8 million with an internal rate of return of 31% for Case 1 and USD 2.49 billion with a 64% internal rate of return for Case 2. Findings from both scenarios included the potential for early start up, subject to mining approval and the establishment of a suitable port facility.

Initial ore shipments from Rocklea could begin as early as 2013.

Low capital due to simple mining and processing operations was another observation, with direct shipping ore and a low strip ratio at Rocklea. Based on the current JORC Resource, the overall waste to ore strip ratio at Rocklea is about 1.2:1.0, and is even more favourable for the initial 66% of the resource at 0.7:1.0.

Capital expenditure can be further reduced by using contractor mining and transportation and other services. Transport for Case 1 and the initial stage of Case 2 would entail 110 tonne capacity multi-trailer trucks along public roads to port.

The development of Nameless to take the project to 10 million tonnes per annum could occur once third party rail infrastructure is established near the project, provided Dragon enters suitable commercial arrangements with the infrastructure owners.
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(Sourced from www.proactiveinvestors.com.au)