Fortescue Metals Group has given the first major insight into the development of its Nyidinghu project, outlining plans for a 30 million tonne-a-year operation from the deposit, which sits about 35km south of its Cloudbreak operations.
In environmental consultation documents released for public comment yesterday, Fortescue said it could see 15 years of production from a Nyidinghu mine, initially at 30mtpa but with capacity to "incorporate peaks in production up to 40mtpa".
That figure is towards the lower end of initial projections for a mine at the deposit. This time last year Fortescue was talking up the idea that Nyidinghu could support a 45mtpa mine, or even as much as 50mtpa.
Development at Nyidinghu will be some years away, even though the consultation documents said construction work could begin by the middle of the year if approvals were received.
Plans released yesterday show Fortescue would need to build a 90km spur line to link the deposit to its existing rail infrastructure from Cloudbreak. Back of the envelope calculations used by industry put rail construction at about $10 million a kilometre, meaning the spur line could cost $800 million to $1 billion, depending on the difficulty of the terrain.
With major debt repayments due in 2015, Fortescue's main focus is squeezing margins from its existing infrastructure, according to chief executive Nev Power. Mr Power has previously said no new major spending would be considered until its target gearing ratio of 30 to 40 per cent was reached by paying off debt.
Speaking last week after the release of Fortescue's half-year report, which showed the company's debt had hit $12.8 billion, Mr Power said the focus would be on expansion and development and efficiencies around its existing operations, rather than on big spends at Nyidinghu or its proposed Western Hub. However, a sale of a minority stake in Fortescue's infrastructure could shift that thinking. A part sale would pay down Fortescue's debts and industry sources have speculated a deal with investors could include the potential for further investment to expand the network.
The Nyidinghu spur proposed by Fortescue runs for a stretch alongside BHP Billiton's Newman line, and down the same rail corridor being eyed by Aurizon (formerly QR National). In addition to Nyidinghu, the line could service Brockman Mining's planned Marillana mine and Iron Ore Holding's Iron Valley project, recently returned to the company by Fortescue.
Fortescue Metals shares closed down 8Â¢ at $4.75 yesterday.