Energy Efficiency Opportunities KML Expansion Project August 2013 Table of Contents • • • • • • • • • • About Karara Iron Ore Basics Base Plant – Mine and Concentrator KML’s Magnetite Process Requirements for a Viable Project Operating Cost The Approach The Process and Outcomes Overall Outcome In Closing About Karara • Located in the Mid-West Region of Western Australia, 215 km eastsoutheast of Geraldton and 320km north-northeast of Perth • Australia’s second magnetite project • World class project with ~2.5bt resource and 30+ year mine life • A Joint Venture and Partnership between Gindalbie and Ansteel Iron Ore Basics • Not all iron ore projects are the same – Hematite – Magnetite • Hematite – Reddish – black mineral – Chemical formula • Fe2O3 – Key property is that the mineral is Non Magnetic – Found in large high grade deposits • 55-62% Fe • Low impurities – but these vary depending on the ore body – No two ore bodies are the same – Often referred to as DSO – Direct Shipping Ore • Mining, crushing and screening required to produce lump and fines products Iron Ore Basics • Magnetite – Black grey mineral – Chemical Formula • Fe3O4 – Occurs with other minerals, predominantly silica bearing minerals • Ore grades vary 10-30% Fe • KML ore averages 36.5% Fe • Not commercially saleable in the raw state – Key physical property is that the mineral is Magnetic – Intensive processing is required to produce a commercially saleable product • Liberation size 25-35 microns • High energy input required to grind the ore – Magnetite concentrates typically • >64% Fe • KML’s magnetite premium products – 68% Fe, 4.75% SiO2 with low other impurities Base Plant - Mine and Concentrator – Mining at a rate of 30mtpa, one of WA’s single biggest mining operations – Commissioning completed and ramp-up well advanced – Ability to produce 8mtpa premium magnetite concentrate Base Plant - Mine and Concentrator – Flythrough The Magnetite Process • High energy intensive process • KML’s magnetite process involves the following unit processes: – – – – – – – – – – Primary crushing Secondary crushing and screening High Pressure Grinding (HPGR) and screening Rougher Magnetic separation Primary Grinding Intermediate Magnetic separation Fine Grinding Reverse flotation, regrind Concentrate thickening and filtration Tails thickening, filtration and stacking Requirements for a Viable Magnetite Project • Ore body – Large ore body - long life of mine to support the capital expenditure – High magnetite grade with low impurities • 36% Fe • SiO2, AlO3 – High metallurgical recovery • Capable of generating a product that is commercially saleable – 68% Fe, 4.75% SiO2 and low impurities – Quality will dictate if the business is a price maker or taker • Access to infrastructure – – – – Power Water Rail Port Requirements for a Viable Magnetite Project • Financial – Operating Cost < Product Revenue • Payback capital (including interest) in an acceptable time • Return value to shareholders • Price volatility The Approach • KML’s Approach – – – – Establish the overall expansion strategy for the company Develop a design concept Develop a design approach Establish the Owner’s team • Expansion Strategy – Board mandate was to expand magnetite production to >30Mtpa by approximately 2020 • Design Concept – Design a plant that is readily expandable in modules whilst causing minimal interruption to the operating plant during construction, commissioning and operation The Approach • Design Approach – Build on the “groups” collective design, construction and commissioning experience – Learn from past mistakes – Undertake all activities during the Feasibility Study to ensure a seamless transition into FEED and detailed engineering design (DED) • No shortcuts, dot the “i”’s and cross the “t” approach – Leverage of the current engineering design as far as practical • Specifications, detailed drawings, 3D model, calculations – Consider constructability during design • Be able to construct without impacting on the operating plant – Consider value engineering opportunities to reduce capital cost, improve operability and reduce unit operating cost. The Approach The Approach • KML’s Owners Team – Establish a core multidiscipline engineering team to manage the execution of the works – Headed by the Project Director, the core team positions are • Legal and Commercial • Project Director • Approvals Document control • Project Manager • Scheduling • Principal Process Engineer • Cost Control • Principal Mechanical Engineer • Manager Optimisation • Principal Civil / Structural Engineer – The competency of the Owner’s team is key to delivering the project on-budget, on-schedule and to the required quality. As a project moves from the study phase into execution, the Owner’s team expands accordingly to deliver the project. The Process • Staged program centered around the evaluation of the Base Plant and equipment in order to identify value adding opportunities to reduce capital and operating costs • Program of work – – – – – – – Base Plant expandability review Concentrator process design review Mining – In pit crushing and conveying study Port and Rail capacity modeling Metallurgical testwork and simulations Value Engineering Definitive Feasibility Study The Process • Base Plant Expandability Review – High level expandability review of the Base Plant to ascertain if the plant can be upgraded or expanded to achieve the overall expansion strategy – Outcomes • A tightly constrained plant layout. Expansion of the mine concentrator is physically constrained by; – Run of Mine pad to the East – Rail to the West – Tailings disposal to the South – Incoming High Voltage power to the North The Process Incoming Power Line LOCATION Rail Loop ROM Pad Tails Stacking Back The Process – Outcomes • Bottlenecks identified in the process flowsheet. Bottlenecks are typically major capital equipment that cannot be easily upgraded, replaced by larger equipment, or additional equipment installed such as; – High pressure grinding rolls – Ball mills – Concentrate and tailings thickening The Process • Concentrator Process Design Review – Detailed review of the Basis of Design to verify and establish a suitable BOD for the expansion – The review involved a review of available data and additional metallurgical testwork – Outcome(s) • Modified process Basis of Design • Simplified process flowsheet The Process • In Pit Crushing and Conveying (IPCC) – External consultant engaged to assess IPCC compared to conventional Haul To Surface (HTS) operation • Previous study completed by Coffey Mining in 2008 reported a significant operatig cost saving for IPCC compared to HTS • Cost savings increase with both rate of production and also in the event that fuel, tyres and labour costs increase at a rate in excess of other operational costs – IPCC options considered – Start 2016 stage 2 Expansion – Start 2018 stage 3 Expansion The Process • Port and Rail Capacity Modeling – External consultancy engaged to model the rail and port system to estimate the true capacity at the port • 16Mtpa capacity based on 60kt shipments at 100hrs average vessel TAT. – KML’s modeling shows 18-20 Mtpa using combination of larger vessels - Panamax/Kamsarmax. The Process • Value Engineering – External engineering consultant engaged to: • Rationalise a plant layout that is expandable with minimal interruption to the operating plant • Identify, assess and rationalise equipment selection by considering upsize opportunities that were not available during the original design • Reduce capital cost • Reduce operating cost • Improve performance and operability The Process – Outcomes • Improved concentrator layout – – – – – Modular and expandable design to meet expansion schedule Engineering easily duplicated at minimal cost Improved maintainability Within existing KML tenements Fully incorporated magnetite and hematite stockpile, reclaim and train load out facility • Process flowsheet retained with equipment alternatives and upsize opportunities considered – – – – Reduced flowsheet complexity Improved operability and maintainability Lower operating cost Lower capital cost The Process • HPGR’s confirmed as the lowest power consumer compared to other commercially available equipment such as; – SAG Mills – AG mills • Increasing the Ball Mill transfer size from the original design value of 55 µm to 120 µm and allowing for additional power in the Tower Mills reduces the overall installed power requirement by approximately 8.6 MW The Process • Definitive Feasibility Study (DFS) – External engineering consultant engaged to undertake the DFS – Outcomes • Robust modular design to meet the overall expansion methodology • Capital and Operating cost estimate to 15± accuracy • Approx 20% lower operating cost compared to the Base Plant due to improved design – Economies of scale due to better use of existing infrastructure and contacts – Improved utilisation and distribution of high power consuming equipment in the process plant Overall Outcome Viable plant design that meets the project objectices In Closing • Mining projects are margin driven business • The cost of production must be significantly lower than product revenue • Efficiency (energy, process) is a key driver in the design phase of every project • • Lowest cost of production targeted at all times Highest operating cost area are the focus • Improvement in efficiency for existing mining operations is difficult due to; • • • • High sunk capital cost Efficiency typically comes from economies of scale Bigger equipment Requires capital expenditure that needs to meet investment hurdles