Home' Australian Resources and Investment : March 2010 Contents AUSTRALIAN RESOURCES & INVESTMENT • MARCH 2010 • 157
iron ore-exploration update
operations. It was known that replacing the incumbent mining
contractor would result in a short-term cost penalty, but at the same
time comparably greater long-term benefits for the Company.
These factors have adversely impacted Atlas' operating cost
performance for the quarter. Operating performance will improve
following the completion of MACA's mobilisation and more significantly
once fixed costs can be spread over further tonnes following the ramp-
up of production, which will occur, concurrent with the availability of
Utah.Iron ore sales reached the targeted level of 1 million WMT for the
2009 calendar year, with 1,020,758 WMT (970,793 DMT) shipped for the
2009 calendar year and 1,082,912 WMT shipped since December 2008.
The demand for product from Atlas' customers has been strong as
evidenced by the two longterm off-take agreements with medium-sized
Chinese steel mills announced on 22 January 2010, reflecting the
general high demand for Australian iron ore. Spot prices are currently
approximately 80% above the benchmark prices agreed by major iron
producers for markets outside China. This differential between spot and
benchmark prices has resulted in the "mutual fairness" adjustment,
whereby cargo pricing is set between prevailing spot and benchmark
prices, being applied for the January 2010 cargo.
Net Australian dollar revenue has also been impacted during the
quarter by the continued strength of the Australian dollar versus the
During the quarter Atlas entered short dated forward exchange
contracts totalling US$12.4 million at an average rate of USD 89.59
cents, with settlement having occurred during January. As at the date of
this report a further two forwards have been entered for US$9 million at
an average rate of USD89.4 cents.
PARDOO DSO RESOURCE DEVELOPMENT
Resource Development activity recommenced at Pardoo in mid-November
2009, with one RC and one diamond rig working on resource definition
drilling in line with the Pardoo expansion project. 115 RC and two
diamond holes were completed to the end of December 2009, for a total
of 3,817m. Drilling initially focused on the Alice deposits -- Alice West,
Alice East and Alice Extension -- before moving on to Chloe and Olivia.
The resource development team is expected to remain active at
Pardoo through to the end of June 2010.
WODGINA DSO PROJECT
The Wodgina DSO Project is located approximately 100 kilometres south
of Port Hedland and immediately adjacent to the existing Wodgina
Tantalum mine, owned by Talison Minerals.
During the December Quarter 187 RC holes were drilled at Wodgina for a
total of 10,237m. The Anson deposit again received the most attention,
with an additional 74 holes drilled to complete the 20m by 20m infill
work. Extensional holes were also drilled at Electra (74 holes), and infill
drilling continued at Dragon to bring the average drill spacing down to
20m by 20m.
During December the drilling data completed over the course of the
year was reinterpreted and used in a new resource model for the Anson,
Dragon and Constellation deposits.
The additional data density allowed approximately 25Mt of resource
to be classified in the measured and indicated categories, allowing it to
be included in updated reserve estimations. During the estimation
process the Anson deposit increased marginally in volume as a result of
additional mineralisation identified in drilling around the fringes of the
ore body. The overall tonnage dropped slightly due to a reduction in the
average in-situ density. This is a conservative model, and the Company
remains confident that any error in tonnes in the final reconciliation
will be to the positive.
Based on the Wodgina Feasibility Study outcomes announced on 31 July
2009 and Atlas' decision to develop and execute the Wodgina DSO
Project as its next mine, project development has commenced at
Wodgina. Atlas has exercised its right to access the existing Wodgina
Mine Infrastructure under its arrangement with Talison Minerals, the
owner of the Wodgina Tantalum Mine. In so doing, the Company has
established a platform to rapidly progress towards the export of iron ore
from the Wodgina Project at a low capital cost. The Company is on track
to commence exports from Wodgina concurrent with the commissioning
of the Utah Point port facility in Port Hedland, which is planned for
early in the third quarter 2010.
Project execution at the Wodgina DSO Project is now well advanced.
The upgrade to the intersection of the mine access road with the Great
Northern Highway is scheduled for completion in January 2010, and CSI
Pty Ltd has commenced the required modifications to the existing
crushing and screening plant to facilitate iron ore sampling and final
product stacking. Bulk earthworks to establish run-of-mine and final
product stockyards are well advanced.
The tendering process for both the Wodgina mining, and haulage
contracts, are nearing completion, with award of these key contracts
likely in the first quarter of 2010. The crushing and screening contract
is facilitated through the existing relationship between Talison Minerals
and CSI Pty Ltd.
Consistent with the timing of delivery of the Utah Point port
facility, mining is expected to commence at Wodgina during the second
quarter of 2010.
In January 2010, the Company announced it had entered into two
new long-term off-take agreements with medium-sized Chinese steel
mills covering a total of 1.1 million tonnes per annum of Atlas DSO
product. These two off-take agreements represent approximately 30% of
the increased production that will occur upon commencement of the
100%-owned Wodgina DSO Project and cover the period to 31 March
2013. Atlas' marketing team has received numerous expressions of
interest for the remaining tonnes and will look to finalise further
agreements in coming months.
Figure 2: Wodgina Project Initial Mine Development Layout
In January 2010, Atlas announced a 120% increase in the Wodgina
Reserves to 20.9Mt at 57.7%Fe, as a result of additional infill and
exploration drilling in the second half of 2009.
The revised Wodgina Reserves are detailed in the following table.
Optimisation and design studies at Wodgina contributing to this
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