OAKAJEE INFRASTRUCTURE PROJECT AND JACK HILLS EXPANSION PROJECT SUMMARY
Murchison Metals Limited (“Murchison”) is pleased to provide the following project summary for the Oakajee infrastructure project and the Jack Hills Expansion Project (“JHEP).
To date, more than $380 million has been jointly expended on advancing both projects by Murchison and its joint venture partner Mitsubishi Development Pty Ltd (“Mitsubishi”), to position Oakajee Port & Rail (“OPR”) and JHEP owner Crosslands Resources Ltd (“Crosslands”) to deliver Bankable Feasibility Studies (“BFS”) for the projects by the end of the June Quarter 2011.
Construction of both projects is anticipated to commence in early 2012.
Highlights
OPR
• OPR expenditure to date +$215 million;
• OPR named preferred proponent to develop Oakajee deepwater port in July 2008;
• OPR awarded exclusive rights to develop port and northern rail infrastructure in March 2009;
• State and Federal governments jointly commit $678 million to fund Common Use Infrastructure at port in May 2009;
• Draft port and rail BFS completed and delivered to WA Government in March 2010;
• Memoranda of Understanding signed with Foundation Customers in August 2010;
• Detailed Technical Engineering Study for port and rail projects completed November 2010;
• Port and rail BFS on track for delivery in June Quarter 2011;
• Deadline for completion of Implementation Agreements with WA Government under Oakajee State Development Agreement (“SDA”) extended to end 2011;
• Optimisation, value engineering and cost compression program ongoing;
• Preliminary engineering design completed for incremental port expansion above 45mtpa;
• Oakajee port and rail projects recommended for approval by Environmental Protection Authority of Western Australia;
• Heritage and native title negotiations progressing with relevant Aboriginal groups;
Crosslands
• Stage 1 Jack Hills mine development commissioned by Murchison in December 2006;
• First shipments in February 2007;
• Over 6 million tonnes DSO lump and fines shipped to date;
• JHEP expenditure to date +$165 million;
• JHEP BFS on track for delivery in current quarter;
• JHEP resource increased to 3.22 billion tonnes @32.3%Fe;
• JHEP flowsheet finalised, confirming initial concentrate production base of +20 mtpa (in addition to Direct Shipping Ore lump and fines);
• Scope for expansion to +30mtpa concentrates (plus DSO);
• Base case mine life of 28 years;
• Premium quality product specification demonstrated by metallurgical testwork;
• Strong customer demand confirmed in mid 2010 with Letters of Intent signed with leading Asian steel mills for the supply of +55 mtpa of concentrate;
• Plant layout and rail loop finalised to minimise waste haulage and double handling;
• Water supply capacity of Byro Basin confirmed and water extraction licence applications submitted to Department of Water;
• Power/gas supply negotiations progressing;
• Gas pipeline licence granted by Department of Mines and Petroleum;
• JHEP assessed as “not a controlled action” under federal Environment Protection and Biodiversity Conservation Act in March 2011. State environmental approvals anticipated in September Quarter 2011;
• Heritage and Native Title negotiations targeted for completion in September Quarter 2011.
Financing
• Joint Venture agreements executed with Mitsubishi in September 2007;
• Initial payment of $150 million for a 50% interest in Crosslands made by Mitsubishi in September 2007;
• Deferred Payment for Mitsubishi’s 50% interest in Crosslands expected in December Quarter 2011, prior to a final investment decision;
• Mitsubishi to manage arrangement of all debt funding for JHEP and infrastructure projects under Umbrella Financing Agreement (“UFA”);
• Mitsubishi required to provide to Murchison up to $400 million in contingent equity type facilities under the UFA;
• Planning for debt funding arrangements well advanced with Mitsubishi;
• Draft short form terms sheets completed with syndicate of domestic and international commercial banks, including all four major Australian banks;
• Draft long form terms sheets under preparation for prospective debt providers, including Export Credit Agencies (“ECAs”);
• ECA engagement process well advanced, including road show in Japan, South Korea and China in March;
• Firm credit offers from debt providers targeted for December Quarter 2011;
• 12 month US$100m bridge finance facility executed with RCF.
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