(MENAFN - ProactiveInvestors - Australia) Crusader Resources (ASX: CAS) is transitioning from explorer to producer with the start of plant commissioning for the production of direct shipping ore from its Posse Iron Ore Project in Brazil.
This places the company on track for first sales and revenue in March.
Sales of direct shipping ore are expected to generate margins of up to A1 million per month after tax.
Posse is a low capital cost project, close to infrastructure and simple logistics as sales will be made at the mine gate to local customers.
Mining of direct shipping hematite iron ore (DSO) will begin in February and quickly expand production to a target rate of 50,000 tonnes per month in April-May.
Production will be further expanded up to 1 million tonnes per annum with additional licensing.
Importantly, forecast costs are expected to be very low at around A12 per tonne and given the current strong global market conditions for iron ore, Crusader will be delivering to local smelters at an opportune time.
Low strip ratio (0.15:1 in early years), free digging (no blasting) and simple crushing and screening of the ore results in very low operating costs.
Iron ore sales will consist primarily of low contaminant, high grade lump and some lower grade fines.
Ore will be sold at the mine gate to local customers including pig iron producers and steel mills and then transported by road.
The Posse project is located within Brazil's famous "Iron Quadrilateral" region which is home to numerous iron ore mines as well as pig iron and steel smelting operations, providing a strong local market for Posse's products.
Crusader has signed three sales letters of intent with domestic smelters and is concentrating on developing its marketing, commercialisation and sales processes.
Significantly, demand from the smelter group is in excess of Posse's projected production.
A Licence to Operate for the Posse project was granted by the Minas Gerais state environmental council, COPAM, late in 2012, allowing Crusader to begin operations at an annual rate of 300,000 tonnes of run of mine ore using simple, dry beneficiation.
The construction of access roads, weighbridge, stockpile areas and office infrastructure began in December 2012 and is nearing completion.
A quantity of ore has already been stockpiled on the run of mine pad ahead of the anticipated start of processing in two weeks' time.
Posse contains an Indicated and Inferred Resource of 36 million tonnes at 43.5% iron.
A drilling program to better define the high grade, DSO haematite ore distribution within the resource has begun. The drilling will aim to expand the resource along strike and down dip.