The board of BHP Billiton steel-making spin off, OneSteel, has approved a $325m mining project that will considerably extend the life of its Whyalla facilities in South Australia.
OneSteel is the former long products division of BHP Billiton and operates a blast furnace, pellet plant and rolling mills at the port of Whyalla as well as several iron ore mines in the area.
It also has an electric arc furnace mini mill in Sydney and rolling mills at Newcastle, NSW, giving total steel production of around 1.7Mtpa.
At spin off, it was cynically loaded up with debt by a former BHP Billiton chief executive and this, for some time, impacted on its ability to carry out long term capital expenditure projects.
Today that debt has been greatly reduced, but an even greater problem is now rapidly approaching. Whyalla was built to operate with hematite ore from its tied mines, but with just 34Mt of hematite reserves left was facing closure after 2020.
This is where Project Magnet comes in. It is a proposal to convert the steelworks to operating with magnetite ore, with exports paying for the cost of conversion. It will take the steelworks life out to at least 2027.
BHP started mining in the Middleback Ranges some 80-100km from Whyalla in 1899 at the Iron Knob mine. The iron ore was used as flux for the Port Pirie base metals smelter.
Subsequently it developed the mines, smelter and even a once large shipbuilding industry at Whyalla, based on mines like Iron Duke, Iron Duchess, Iron Knob, Iron Baron, and Iron Knight along a 100km zone.
According to Whyalla Steelworks general manager Jim White, while some of the mines like Iron Knob and Iron Baron are now closed, they still have some resources available, depending on iron ore prices.
Limestone was imported from Japan because there were few sources in the world of high metallurgical grades.
At present the hematite iron ore is mined in the South Middleback Ranges and railed to Whyalla where it is crushed and ground, creating the “fog” of red dust that covers the rooftops of the city.
But Project Magnet will change all that, by converting the steelworks supply from a dry to a wet one. The new magnetite mine will allow OneSteel to not only convert the Whyalla operations but to also develop a lucrative export market that will pay for the cost of conversion.
Total magnetite inferred resource in the South Middleback Ranges is 234Mt at more than 35% iron. Of this, smaller outcropping pockets or deep pockets of ore will be ignored and OneSteel will target those ore types usable in the beneficiation process in percentages it believes are achievable.
Further, pit optimisation will be undertaken using Whittle software, which will effectively reduce the resource to around 100Mt.
Finally, beneficiation with a 40% mass recovery will produce around 40Mt of manganese concentrate at 66% iron.
At present the hematite ore mining operations produce 3Mtpa of ore. Of this 1Mtpa goes by ship to Bluescope Steel at Port Kembla, the vessel returning with an equivalent amount of coal for the coke ovens at Whyalla.
Whyalla produces a further 2Mtpa of pellets and lump ore for its blast furnace and sends a rail shipment of steel billet to the Newcastle mills once a day.
Now Project Magnet is approved, 9.5Mtpa of both magnetite and hematite ore will be produced at less than 32mm size, with crushing and screening at the mine site.
Of that total, some 4.5Mtpa will be magnetite ore, of which 2.7Mtpa will be magnetite tailings and 1.8Mtpa magnetite concentrate, which will be conveyed by pipeline as a slurry to the steelworks’ pellet plant.
Regarding the pellets, it is anticipated that 1.47Mtpa will go to the Whyalla blast furnace and 0.32Mtpa will be exported.
With the low grade stockpiled hematite ore, some 1.6Mtpa will be beneficiated, with 0.6Mtpa going to tailings, 400,000tpa as blast furnace lump and 600,000tpa going to export.
Another 3.4Mtpa of hematite ore will be crushed and screened for export. Of this 2.4Mtpa will be fines and the balance lump.
OneSteel also expects to export up to 90,000tpa of slab steel once the project is ramped up.
The end result of this flowchart is that exports will be 1Mtpa of hematite lump, 2Mtpa of fines and 320,000tpa of pellets for at least 10 years.
The magnetite ore will not come from a new pit but through the deepening of the existing Iron Duke open pit and extending its footprint. The pit will eventually go 300m below normal surface, which is amazing considering for many years the open cut was perched on the top of a hill.
Some $10m has been spent since 1999 on readying the crushing and screening facilities at the mines and benefaction facilities at the mine site.
The magnetite concentrate pipeline is a direct one and is mostly downhill over its 65km length, along existing corridors. Water will be taken out of the slurry and piped back up to the mine in a continuous loop to minimise water requirements in an arid region.
The stage one project for Project Magnet was allocated $30m for basic and detailed engineering and the mine cut back, which has already started. Further drilling has also been undertaken.
With 20,000ha of exploration ground around the Iron Magnet project, White say he is confident that further reserves can be proved up to extend Whyalla’s life beyond 2027.
First facilities will come on stream in June 2006. Full ramp-up is anticipated at the end of the 2006-7 financial year.