IT seems an unusual concept – find iron ore under the Indian Ocean, build a dam to hold out the sea and dig out the minerals. However, that is exactly what first BHP and now the Portman Limited-Henry Walker Eltin partnership is doing.
The two partners in the Cockatoo Island iron ore project have agreed to continue the iron ore project, which was beset with problems in the middle of last year.
They have agreed to recommence construction of stage two of the seawall that holds back the ocean and have set a target of returning to full mining production in August 2004.
Even with the problems that have been besetting the project, monthly shipments of about 50,000 tonnes of iron ore have still been attained.
With stage two of the seawall completed shipments of 100,000 to 130,000 tonnes a month should be possible.
The companies have received positive results from reviews of operations including the areas of resource definition, geotechnical stability, capital expenditure, operating costs and pit dewatering.
The resource definition review was better than originally believed and the geotechnical review of the seawall was also positive. It has indicated that more iron ore can be dug out from the seawall enclosure.
Water inflows from the test bores are significantly lower than forecast, enabling a simpler dewatering model, meaning deep dewatering bores will not be needed and open sump pumps will be able to handle the revised inflows of less than half original volumes.
While export was cut back, the companies envisage that they should be able to return to fort-nightly shipments of iron ore.
Henry Walker Eltin CEO and managing director Bruce James said the review had shown that the risks on Cockatoo Island could be managed.
"We expect the project to return to strong cash flows and a positive earnings contribution upon completion of construction of the stage 2 seawall early in the 2005 financial year, he said.
"Additional geotechnical test work conducted in conjunction with the dewatering study has also identified the original pit design parameters to be conservative, enabling the excavation of additional iron ore tonnages from within the seawall enclosure."
Mining on the island, which is conducted by Henry Walker Eltin, is expected to continue for another three years, although there is some exploration underway.
Portman managing director Barry Eldridge said increased production from Cockatoo Island would have a significantly positive impact on the company’s cashflow in profit.
However, he refused to quantify that, saying that he would not speculate on cashflow or profit forecasts.
"The shipments out of there have been at a breakeven or even a slight profit," Mr Eldridge said.
He said the exploration was not extensive although there were a few opportunities.
Portman posted a $16.9 million full year net profit after writedowns of $2 million.
The result was struck on a 12.8 per cent increase in sales revenue to $145.3 million, up from $128.8 million in 2002, and was based on increased ore shipments from its Koolyanobbing project of 4.7 million tonnes.
Mr Eldridge said the company expected 2004 to be a greatly improved year.
"With the iron ore market remaining extremely buoyant – driven mainly by the rapidly growing Chinese market – development of the Mt Jackson and Windarling deposits nearly completed and Cockatoo Island expected to make a positive earnings contribution later this year, the outlook for 2004 and beyond is very positive," he said.
