ELIWANA ON THE UP
The Fortescue Metals Group (FMG) has committed to taking its iron ore production to another level of almost 200mtpa with its Eliwana project in WA’s Pilbara region. FMG has budgeted a mammoth $1.93b for the project, set to start up in December 2020. Const
ELIWANA is Fortescue Metals Group’s (FMG) latest mining project for iron ore in the Pilbara region of WA and is set to start production later in the year.
The mine site will form a new Western production hub for the company.
First ore from Eliwana is expected to flow in December 2020.
According to an FMG statement, the US$1.275b Eliwana mine and rail project is on schedule and budget with first ore on train due in December 2020.
Site-based work on the project is currently ramping up, and peak construction workforce is expected to be reached in the middle of the year.
The Eliwana project is important as it will enable FMG to sustain production of its premium West Pilbara fines product and provide the company with the flexibility to deliver iron ore with an iron content of 60pc.
The new project is also the next stage in FMG’s expansion of its Pilbara operations.
According to FMG chairman Andrew Forrest, Eliwana is the next great step into the Western hub, enhancing the miner’s profitability and extending mine life.
He said the project is expected to generate 1900 jobs in its construction phase and another 500 jobs on site in its operational phase.
WA premier Mr Mark McGowan said with around 2400 jobs created in construction and operations, Eliwana will create significant opportunities for Western Australian workers.
WA companies have shared in the award of contract work for the project.
Rail link
In January 2020, the project took a significant step forward with the WA government awarding a special rail licence for the supporting railway.
The licence allows FMG to build and operate the rail project which is needed to transport Eliwana iron ore to Port Hedland.
The 143km-rail corridor is under construction and will connect Eliwana to FMG’s existing Kings iron ore mine at its Solomon production hub in the Pilbara.
The WA government rail license enables the iron ore producer to build and operate the Eliwana rail project for the mine.
A rail fleet of 126 ore wagons and four locomotives has been commissioned for Eliwana.
“The development will utilise the latest technology, autonomous trucks and design efficiency, further cementing Fortesque’s world leading use of innovation across its mining operations,” FMG said in a ASX company notice.
Investment in the Eliwana project has already reached US$1.27b, which covers the construction of a 30mtpa iron ore mine, processing plant, and the rail link to Fortescue’s existing mines.
Other mines operated by FMG in the Pilbara include Cloudbreak and Christmas Creek which come under the company’s Chichester hub.
Production
In a speech delivered at a mining industry event in Perth in February, FMG chief executive Elizabeth Gaines said the Pilbara region of WA was home to three of the world’s four largest iron ore producers, which together export 800mtpa of iron ore.
“WA is the largest source of iron ore for China, which in 2019, produced a record 996mt of crude steel as it continues its path of urbanisation and development,” Ms Gaines said.
China’s crude steel production rose 8.3pc in 2019 compared to the 2018 year, said the company in its January 30 production update.
FMG’s production guidance for the 2020 financial year is for its shipments to reach 170m to 175mt, stated the company February in its half-year update.
The iron ore company shipped 88.6mt of its Pilbara product in the six months ended December 2019, which equates to 177mt on an annualised basis.
“Total iron ore stocks at Chinese ports at the end of the [December 2019] quarter were 127mt, representing approximately 42 days offtake, similar to the end of last quarter,” FMG said in its latest production update.
Ms Gaines said FMG is deploying innovative technology in its mining operations, and it has trained staff to embrace this new technology.
The company’s autonomous vehicle fleet has travelled 39m km and moved 1.1bt of material, she said.
“Every day our autonomous fleet travels a distance equivalent to 3.5 times around Australia’s highway one, without drivers at the wheel,” Ms Gaines said.
Autonomous technology has contributed to FMG lowering its production costs.
FMG’s production cost base for its iron ore operations is forecast to be just US$12.75-13.25/wet metric tonne, stated a February company presentation.
FMG’s average revenue for the September-December 2019 quarter was US$76/dmt, up 58pc compared with the corresponding 2018 quarter period.
At current market prices, FMG has an operating margin of around US$63/t.
Iron ore prices are forecast to decline to an average of US$60/t by 2021, according to the Australian government’s Office of the Chief Economist in his report for the December 2019-ended quarter.
“Eliwana is the next great step into the Western hub, enhancing our profitability and extending our mine life.”