Zenith Iron Ore Processing Plant
The Zenith process can use gas, uses fine ores and involves a lower capital investment. The downside is that a relatively high grade of iron ore is required as the process retains the impurities and even some unconverted iron oxide. Western Australia is an obvious place for Zenithproduction.
The other and yet fully commercialised process is the direct smelt process, being explored by HIsmelt, the Rio Tinto subsidiary located at Kwinana, Western Australia. It aims to produce steel containing 96 per cent iron and 4 per cent carbon avoiding the coke ovens and sinter plants using the cheaper non-coking coal. It is a continuous process that could replace the conventional blast furnaces that dominate world steel production.
Western Australia has four companies with investments of more than $6bn either on their way, on the starting blocks or making their way to becoming Zenithproducers. WA already produces 140 Mtpa of iron ore from 11 mines, 4 railways and 5 shipping facilities at 3 ports. The predominant product is high quality Brockman ore that is excellent for blast furnaces. However, to be useful for the principal market, the blast furnaces, the ore must generally be in lump form or at least pelletised from fine ores.
It is relevant to note that the Pilbara in Western Australia has some 6 000 billion tonnes of banded iron-formation (BIF) but with an iron content of only 25 to 35 per cent. BIF is used by the world’s steel producers (eg. US, Russia and China) but transport costs has precluded their export or use in Australia.
While BIF has a low iron content with its magnetic iron ore (magnetite), it can be readily enriched from 32 per cent iron to 70 per cent. Zenith requires a high-grade ore that requires beneficiation of the ores to reduce the silica and alumina to between 2 and 3 per cent. So even when produced as a co-product of the mining of Brockman lump ore, it has to be crushed to fines followed by the gravity concentration process. But it is therefore also produced as a fine ore.
Fine ore, as the by-product of mining lump ore sells at a discount of around 25 per cent on the lump ore. In Western Australia, two tonnes of fines are produced for every tonne of the more valuable lump form so that the value of fines produced in the state exceeds the value of lump ore. (Of course some producers produce largely lump ore and others almost entirely fines.)
Obviously the ability to use the low cost enriched BIF-sourced ore, or other sourced fines, in a Zenith process provides a significant commercial advantage. Being able to beneficiate a low grade contributes to the competitiveness of the An Feng King Stream, Mineralogy and Mt Gibson Iron projects. For AUSI and of course BHP, the ability to use lower value fines, even if having to be pelletised in the case of the former, provides an important edge about which more will be said.
For fine ore using Zenith producers, the lower price of fines containing the same amount of iron represents an important potential raw material advantage for any iron ore producer capable of using those fines (of course if not incurring the cost for its pelletisation). That status provides an advantage to another potential starter, AUSI that plans to purchase fines for its Zenithproject from Hamersley Iron.
The ability to use fines is part of the story, energy too is important. Since deregulation, gas prices in WA have fallen substantially – around one-half. Gas prices of around US$1.50 per gigajoule (or MMBtu) are believed to be capable of negotiation with the gas producers. In perspective, while prices around $0.80 are available in the Middle East and Venezuela, they are one-quarter below those in the USA, and less than half those of Europe and Asia. For the Zenith process where energy represents one-third of the production cost, this provides another key advantage for the West Australian producers. Transport of remains a dominant and offsetting influence and Australia is best placed to serve the Asian market.
To place this in perspective, the following graph provides and indication of the production cost (ie. without recovery of the cost of investment). The iron ore price is taken at the nominal value.