Resource World Magazine

MINI NG Kazax bets it can build Kazakstan iron mine by David Forest "Building" has become a dirty word in the mining business. Costs for capital projects across the industry are exploding. In August, Barrick Gold [ABX-TSX] reported a $5.1 billion write-down on its Pascua-Lama project in Argentina and Chile after construction costs ballooned to over $8 billion. This high-cost environment has struck fear into the hearts of Examining diamond drill core at the Lomoonosovskoye iron ore project in project developers. Today, companies are shying away from talk of Kazakhstan. Photo courtesy Kazax Minerals Inc. actually building mines – preferring instead to discuss "optimizing" existing assets. Amid such a setting, Kazax Minerals [KZX-TSXV] kind of asset a company Kazax's size is capable of putting into is taking a bold tack and is moving aggressively to build and oper- production. ate its Lomoonosovskoye iron ore mine in Kazakhstan. The work is all the more doable given the resource can be In fact, building is the reason Kazax was created. The company developed by open pit mining. A process the company's managewas masterminded by the Stonehouse Group – a Singapore-based ment is now designing. firm run by mining and heavy construction experts. The group's With environmental and land use permitting expected immistated aim is finding advanced assets and using their skills to bring nently, the company is pushing to begin pre-stripping in the third the deposits to production quickly. quarter of 2013. Achieved, this would represent a remarkable leap Early in 2012, Stonehouse made a play to do just that with Lomo. from project acquisition to mine development in under two years. The group liked what it saw in the project – a sizeable resource in With the mining process well advanced, Kazax is looking a proven district with rail, road, power and labour. Stonehouse at the next steps in bringing Lomo to life. Metallurgical bought into Kazax and got to work drilling, and running with min- testwork is underway to feed into process plant design and ing planning and processing studies. A look at the project reveals start-up – expected to run nearly concurrently with stripping why seasoned miners would be attracted. activity. The potential at Lomo is obvious from the moment one enters Here too, management is capitalizing on the mining history of the the nearby town of Rudny. The name translates as ore town. The Rudny district. Testwork completed on Lomo in 1982 gave Kazax area has, in fact, been producing iron for half a century; it comes upfront confidence that the deposit's magnetite ores can be sucwith infrastructure that any mine developer would envy. Aside cessfully upgraded to saleable concentrate. Those tests showed that from road and rail nearby, a gas pipeline sits practically atop the simple magnetic separation could create a concentrate grading 66% project, with a power station in sight. to 68% - numbers very acceptable to most steelmakers. Kazax's backers at Stonehouse recognized these facilities as Strategies such as using historic data have helped Kazax move an advantage. Many iron deposits globally have been promoted to the mine-building stage quickly and affordably. The effort based on huge size – in the billions of tonnes. But lately many of has also been aided by having mining experts in-house – thus those works have collapsed under their own weight. The truth is reducing the need for the expensive external consulting many that big deposits today left undeveloped are generally remote or would-be developers have looked to. otherwise challenged – coming with capital costs unwieldy for a The last piece in the puzzle for Kazax is figuring out where to junior. sell its final iron ore concentrates. Here too, management is taking Lomo's capex, however, is pegged at a manageable $631 mil- charge and mapping a strategy instead of leaving the offtake to lion, for which the project returns an estimated net present value chance. of $757 million, with an internal rate of return running a very Management has first taken care to ensure that the chosen prorespectable 24%. cess method will create a product that meets mill requirements for These solid numbers are a result of Kazax's principals having Chinese and Russian customers – the two obvious markets from identified an asset that walks a fine line between size and work- Kazakhstan. They have also identified potential steel mill customability. At a mineral resource of 333.5 million measured and ers within a 1,700 kilometre radius of the project. indicated tonnes, plus an additional 108.7 million inferred tonnes, A lot of pieces are coming together quickly. That's what it takes the size is large but not megaproject-scale. This is exactly the when you're driven to build a mine. n 42 www.resourceworld.com SEPTEMBER 2013

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