Atlas talks up Corunna Downs

Atlas Iron is talking up a big future, with managing director Ken Brinsden yesterday likening the miner's emerging Corunna Downs corridor to BHP Billiton's Goldsworthy operations.

Speaking after the release of another solid quarterly production report, Mr Brinsden said Atlas was re-jigging feasibility studies on the development of its McPhee Creek operation to include the possibility of a processing and blending hub at Corunna Downs, which sits between McPhee Creek and its under-construction Mt Webber mine.

The prospect of a big corridor to underpin the next decade of production has Mr Brinsden excited.

"To give you some idea of the scale that we think we're onto, in that corridor between Mt Webber and McPhee Creek, I'd draw analogy to BHP Billiton's North Pilbara operations between the historic Goldsworthy mine and all the way out to Yarrie," he said.

"There, over the last 40 years, BHP has mined something in the order of 200 million tonnes. Atlas has a corridor almost equivalent in scale in terms of its strike extent, and we've already identified 340 million tonnes in resources."

Corunna Downs is about 100km from the nearest northern rail path. Together with the set-up of bigger mines and a blending hub, it is likely to require a far bigger capital outlay than Atlas had been prepared to commit to, even factoring in the $200 million it will spend on its 6mtpa Mt Webber mine.

BHP Billiton's 35mtpa Jimblebar hub came with a $US3.6 billion price tag.

Analysts have estimated Rio Tinto would need to spend more than $US3.2 billion to develop its 35mtpa Koodaideri mine, which also includes a 167km rail spur.

Corunna Downs is unlikely to come with that kind of bill, but Mr Brinsden conceded a new hub would require a "step change" in Atlas' capital outlay.

"We would argue the company is well-set to be able to deal with that," he said. "We've also flagged that we do have a plan to sell down project equity in those larger development projects.

"We think there's a lot of logic in bringing along a partner with us and you've only got to look at those longstanding relationships that BHP has in the North Pilbara, for example, to appreciate just how important they've been over time."

Atlas said any sell-down of project stakes was "predicated" on negotiating a rail deal.

It said discussions on the integration of its 63 per cent holding of the 50mtpa North West Infrastructure allocation at Port Hedland into a rail access deal were continuing. Atlas shares gained 2¢ yesterday to 97.5¢.

The West Australian

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