7th Annual Mining the Pilbara

Latest Developments in the West Australian Magnetite Industry

16 July 2013

Members

2

Economic benefits of magnetite

Magnetite Concentrate vs DSO Production Process

5

Value-adding in Australia

Magnetite Concentrate Production Process - Fe3O4

Mine → Crush → Grind → Separate → Concentrate → Stockpile → Ship

5

Benefits

• Magnetite has minimal value as raw ore – requires massive beneficiation before it is saleable to the steel industry.

• This processing is energy and emissions intensive in Australia.

• Producing steel from magnetite has lower overall carbon emissions than using hematite.

• Capital intensive downstream processing provides long term jobs, regional development and infrastructure.

• The national interest is served by recognising that magnetite results in lower global emissions and greater domestic economic benefits.

7

Australian DSO Quality Steadily Declining

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

68.0%

70.0%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

% F

e

Magnetite Conc.

Brazilian Fines

Pilbara Fines

FMG Fines

Magnetite Concentrate is a premium product consistently > 68% Fe

Objectives Formed in April 2009 to:

• Provide legislators with evidence based arguments for the promotion of the existing

and emerging magnetite industry, and by doing so provide MagNet with the

opportunity to influence public policy and debate;

• Maximise public policy settings that will attract investment;

• Build widespread recognition within all tiers of government and the public as to the

benefits to Australia from the magnetite industry and its regional development &

value adding potential;

• Promote Australian magnetite projects as an important emerging group within the

iron ore industry;

• Demonstrate the significant net global reduction in carbon emissions that result

when magnetite is compared to hematite iron ore steel production; and

• Demonstrate the significant economic, social and regional development

opportunities from magnetite projects.

State Royalties

• Exempted from current Review of Royalties

announced with State Budget in May, 2012

Magnetite Rebate

• In November, 2012 Premier announced that royalty

rebates will apply to new projects

• Reduction of 50% from current 5% for first year of

production

• Detail of policy in negotiation

Where to on Carbon Pricing?

• December 2011 – Minister Combet announces 66%

moderately emissions intensive assistance – free permits

• Based on 4Mtpa production in total – Arrium and Grange

Resources – different emissions to WA projects

• Inequity created as no WA projects were yet in production

so not factored in to allocative baseline used for free permit

grants

• Two WA projects start this year with 40Mtpa combined

production- higher intensity emissions

• Other comparable industries were granted additional

special assistance such as LNG, steel.

Global Carbon Savings

Life-cycle analysis of magnetite shows that even though it is about seven times more

energy intensive in Australia than hematite production, it has an overall global emissions reduction benefit when used in steelmaking.

0

500

1000

1500

2000

2500

3000

3500

Total CO2 saving in downstream processing by using magnetite ore in steelmaking Mine to ship (CO2 emission differences between Magnetite versus hematite in Australia)

kg C

O2

e/ t

on

ne

of

mag

net

ite

pro

du

ct

CO2 saving in

steelmaking in

China

CO2 penalty due to

beneficiation in

Australia

Net

reduction

of 108kg

per tonne

CO2

emissions

from mine

to steel

Based on Sino Iron project emissions

Global Emissions Savings

Hematite Magnetite

Gre

en

ho

use

Gas

Em

issi

on

s ac

ross

th

e g

lob

al s

tee

l val

ue

ch

ain

.

Hematite vs. Magnetite Emissions

Emissions in Australia Emissions overseas

NB. Illustrative chart only based on Lifecycle Analysis of the Sino Iron project prepared

in 2008 based on modelled emissions. 12

Karara Iron Ore Project

• Gindalbie Metals Limited dispatched its first shipment of magnetite

concentrate from the Karara Iron Ore Project to China on 1 January

2013.

• Commissioning of the Karara Concentrator continues to progress well.

The Project is on track to achieve its Stage One production capability of

8Mtpa.

• The Karara Project was officially opened on 9 April 2013 by Premier

Barnett and the Iron Ore port terminal in September 2012. The Karara

Project has invested $3billion plus in new infrastructure in the Mid West

region.

Karara Mining – Gindalbie/AnSteel JV

The Sino Iron project

15

Ownership

CITIC Pacific Mining (CPM) is owned by CITIC Pacific in Hong Kong:

•CITIC Pacific – listed on HKSE - business focus is special steel, iron ore mining and real estate

•CITIC Pacific is 58% owned by CITIC Group (Beijing)

An Update

• CITIC Pacific Mining continues commissioning of its Sino Iron Ore

Project at Cape Preston.

• It’s the largest magnetite mining and processing operation in Australia

and the Sino Iron project is currently China’s biggest mining investment

in Australia.

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Desalination plant

Power Plant

Delivering our commitments –

local content

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Australia and China – working together