Shree Minerals (ASX: SHH) is maintaining the momentum to achieve near term cash flows from direct shipping ore (DSO) at the company's Nelson Bay River Iron project, with Feasibility studies progressing on schedule.
The studies are based on the 12.6 million tonne (1.8Mt Indicated and 10.8Mt Inferred) Resource estimation by Hellman & Schofield in October 2010.
Minserve has conducted the mine planning and site layout for mining the DSO and the follow-up magnetite resources.
The DSO will be mined first from an open pit to 40 metres, followed by a magnetite pit to 225 metres.
The mine plan has been based on open pit mining for an initial 10 year mine life based on 400,000 tonne per year of ore.
The hematite ore is similar to ore found in Western Australia's Pilbara region; low alumina and a premium product easy-to-extract, and should enable Shree to gain near term cash flows with little financial or execution risk.
As part of the feasibility study, budgetary proposals have been obtained for operations based on mobile contractor equipment, transport contractors and port facilities.
Mining of DSO material is likely to have a CAPEX cost only around $4 million and using contractor mobile mining and crushing would only take between three to four months to set-up.
These studies have indicated an estimated FOB Burnie port cash cost in the range of A$45 to A$50 per tonne for the DSO product.
The DSO ore is moderately strong and bulk handling will be possible due to the high ratio of lump to fine split (68% to 32%).
Current market prices are very favourable for Shree, with recent spot prices of iron ore fines 62% iron around U$186 per tonne, with a continued strong forecast demand from China.
Lump ore prices are also trading at a premium to these prices.
At current Lump and Fines prices, the DSO output from Nelson Bay is expected to generate $15-20 million in annual cash flow for Shree.