Australia's OneSteel Scores with $173 Million 'Project Magnet' Ore Switch at Whyalla

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Conversion of the ore feed from hematite to magnetite will see the life of the Whyalla steelworks in South Australia extended by seven years, from 2020 to 2027. Bob Every, CEO of OneSteel (ASX:OST) (Sydney, Australia), reported that the company had successfully completed the feasibility study into its magnetite ore resource in the South Middleback Ranges in South Australia, and that the board had given the go ahead for the $173 million Project Magnet.

The switch in ore will provide a number of advantages to the steelmaker, starting with a reduced cost in steel production, resulting from the chemical make-up of magnetite. OneSteel will be able to sell off 30 million tons of hematite ore over the next ten years. This would be in addition to the one million tons per year currently sold, said Every. The investment in Project Magnet had been raised by $35 million over the original figure to increase the scale of the operation, in order to take advantage of the continuing strong demand from China. Iron ore sales had been accelerated to three million tons a year, up from two million. In total, current mining operations at the Whyalla will increase from three to about nine million tons a year.

The project is scheduled to be fully operational in the 2006/2007 financial year, with expansion of ore sales implemented in the intervening period. Twenty-one million dollars has been approved for the start-up phase at Whyalla. This will be spent through to December 2004. This phase includes the initiation of the detailed design work, mobilizing key engineering resources, securing long-lead time items, further drilling and test work, preparation and initiation of mine cutback, and contract selection for construction and marketing agents.

The project will give the company an incremental 3.2 million tons of iron pellets and an extra million tons of slab over the next ten years. "The project will generate in excess of $700 million in revenue over the next ten years," Every said.

Project investment will cover mine cut back, beneficiation facilities, a slurry pipeline, conversion of the Whyalla pellet plant, construction of a desulfurization plant, and the upgrade of port storage and handling facilities.

Every sees OneSteel enhancing its competitive advantage over regional competitors who produce steel from scrap. OneSteel at Whyalla produces 65% of the company's total steel processing steel from iron ore. High scrap steel prices are expected to continue at $250 to $300 a ton for some time, buoyed up by strong Chinese demand.

There is also an environmental plus flowing from Project Magnet. "The project will have a beneficial impact on fugitive dust in the Whyalla township, since converting the pelletizing process from a dry to a wet operation will significantly reduce dust from the pellet plant. The crushing and screening elements of the plant are currently being located to the mine site," said Every.