A2G08 Team Members:

Masaki Takaoka
Tessa van de Werve
Bolun Liu
Diogo Cotrim
Xiangnan Meng

Recommendation:
Option 3 is NPV positive under all 3 scenarios, and should be accepted.
Option 1 should only be accepted if the plant can be sold for more than the highest NPV of Option #3

Notes/Assumptions:
Assumed Risk Free Rate (Rf) = 8%
Assume favourable tax rates -> Ignore
A perpetuity is assumed for cash flows from 2004 onwards

Summary of NPVs
Option 1 Option 2 Option 3
Scenario 1 N/A $15,124,265 $199,944,823
Scenario 2 N/A $12,707,104 $195,797,691
Scenario 3 N/A -$7,850,484 $160,526,539

Cash Flow Summary Tables

See Tabs for Scenario/Option combination
S1O2
Output [tpa]: 656270 750118 750118
<<< Output and Cost value
Costs: $ 84,041,744 $ 93,086,807 $ 93,086,807
Price Probability 2002 2003 2004
75 7% -$6,000,000 -$36,827,972 -$36,827,972
85 7% -$6,000,000 -$29,326,794 -$29,326,794
95 0% -$6,000,000 -$21,825,616 -$21,825,616
105 21% -$6,000,000 -$14,324,438 -$14,324,438
115 7% -$6,000,000 -$6,823,260 -$6,823,260
125 7% -$2,007,936 $677,918 $677,918
135 0% $4,554,768 $8,179,096 $8,179,096
145 21% $11,117,473 $15,680,274 $15,680,274
155 29% $17,680,177 $23,181,452 $23,181,452
Cash Flows
NPV
S1O3
Output [tpa]: 656270 830365 830365
<<< Output and Cost value
Costs: $ 84,041,744 $ 87,075,913 $ 87,075,913
Price Probability 2002 2003 2004
75 7% -$8,000,000 -$24,798,526 -$24,798,526
85 7% -$8,000,000 -$16,494,875 -$16,494,875
95 0% -$8,000,000 -$8,191,223 -$8,191,223
 105 21% -$8,000,000 $112,429 $112,429
115 7% -$8,000,000 $8,416,080 $8,416,080
125 7% -$2,007,936 $16,719,732 $16,719,732
135 0% $4,554,768 $25,023,383 $25,023,383
145 21% $11,117,473 $33,327,035 $33,327,035
155 29% $17,680,177 $41,630,687 $41,630,687
Cash Flows
NPV

S2O2
Output [tpa]: 596426 656270 750118
<<< Output and Cost value
Costs: $ 78,273,866 $ 84,041,744 $ 93,086,807
Price Probability 2002 2003 2004
75 7% -$6,000,000 -$34,821,459 -$36,827,972
85 7% -$6,000,000 -$28,258,755 -$29,326,794
95 0% -$6,000,000 -$21,696,050 -$21,825,616
105 21% -$6,000,000 -$15,133,345 -$14,324,438
115 7% -$6,000,000 -$8,570,641 -$6,823,260
125 7% -$3,720,658 -$2,007,936 $677,918
135 0% $2,243,598 $4,554,768 $8,179,096
145 21% $8,207,855 $11,117,473 $15,680,274
155 29% $14,172,112 $17,680,177 $23,181,452
Cash Flows
NPV

S2O3
Output [tpa]: 596426 726478 830365
<<< Output and Cost value
Costs: $ 78,273,866 $ 78,782,874 $ 87,075,913
Price Probability 2002 2003 2004
75 7% -$8,000,000 -$24,297,019 -$24,798,526
85 7% -$8,000,000 -$17,032,238 -$16,494,875
95 0% -$8,000,000 -$9,767,458 -$8,191,223
105 21% -$8,000,000 -$2,502,677 $112,429
115 7% -$8,000,000 $4,762,104 $8,416,080
125 7% -$3,720,658 $12,026,884 $16,719,732
135 0% $2,243,598 $19,291,665 $25,023,383
145 21% $8,207,855 $26,556,446 $33,327,035
155 29% $14,172,112 $33,821,227 $41,630,687
Cash Flows
NPV

S3O2
Output [tpa]: 596426 596426 691053
<<< Output and Cost value
Costs: $ 78,273,866 $ 78,273,866 $ 87,394,086
Price Probability 2002 2003 2004
75 7% -$6,000,000 -$33,541,941 -$35,565,127
85 7% -$6,000,000 -$27,577,685 -$28,654,599
95 0% -$6,000,000 -$21,613,428 -$21,744,071
105 21% -$6,000,000 -$15,649,171 -$14,833,543
115 7% -$6,000,000 -$9,684,915 -$7,923,015
 125 7% -$3,720,658 -$3,720,658 -$1,012,487
135 0% $2,243,598 $2,243,598 $5,898,041
145 21% $8,207,855 $8,207,855 $12,808,569
155 29% $14,172,112 $14,172,112 $19,719,097
Cash Flows
NPV

S3O3
Output [tpa]: 596426 660231 764981
<<< Output and Cost value
Costs: $ 78,273,866 $ 73,494,549 $ 81,856,428
Price Probability 2002 2003 2004
75 7% -$8,000,000 -$23,977,217 -$24,482,887
85 7% -$8,000,000 -$17,374,906 -$16,833,081
95 0% -$8,000,000 -$10,772,595 -$9,183,276
105 21% -$8,000,000 -$4,170,284 -$1,533,470
115 7% -$8,000,000 $2,432,027 $6,116,335
125 7% -$3,720,658 $9,034,338 $13,766,141
135 0% $2,243,598 $15,636,649 $21,415,946
145 21% $8,207,855 $22,238,960 $29,065,751
155 29% $14,172,112 $28,841,271 $36,715,557
Cash Flows
NPV
mary Tables
ption combinations

<<< Output and Cost values taken from scenario tabs

2002 2003 2004 Cash Flow forced to -
-$426,000 -$2,614,786 -$2,614,786 6m due to idling costs
-$426,000 -$2,082,202 -$2,082,202
$0 $0 $0
-$1,284,000 -$3,065,430 -$3,065,430
-$426,000 -$484,451 -$484,451
-$142,563 $48,132 $48,132
$0 $0 $0
$2,379,139 $3,355,579 $3,355,579
$5,056,531 $6,629,895 $6,629,895 2004 onwards
-$6,000,000 $1,786,736 $1,786,736 $22,334,206
$15,124,264.88

<<< Output and Cost values taken from scenario tabs

2002 2003 2004 Cash Flow forced to -
-$568,000 -$1,760,695 -$1,760,695 8m due to idling costs
-$568,000 -$1,171,136 -$1,171,136 + improvement costs
$0 $0 $0
 Cash Flow forced to -
8m due to idling costs
+ improvement costs

-$1,712,000 $24,060 $24,060

-$568,000 $597,542 $597,542
-$142,563 $1,187,101 $1,187,101
$0 $0 $0
$2,379,139 $7,131,985 $7,131,985
$5,056,531 $11,906,376 $11,906,376 2004 onwards
-$8,000,000 $17,915,233 $17,915,233 $223,940,409
$199,944,822.97

<<< Output and Cost values taken from scenario tabs

2002 2003 2004
-$426,000 -$2,472,324 -$2,614,786
-$426,000 -$2,006,372 -$2,082,202
$0 $0 $0
-$1,284,000 -$3,238,536 -$3,065,430
-$426,000 -$608,516 -$484,451
-$264,167 -$142,563 $48,132
$0 $0 $0
$1,756,481 $2,379,139 $3,355,579
$4,053,224 $5,056,531 $6,629,895 2004 onwards
-$6,000,000 -$1,032,640 $1,786,736 $22,334,206
$12,707,103.87

<<< Output and Cost values taken from scenario tabs

2002 2003 2004
-$568,000 -$1,725,088 -$1,760,695
-$568,000 -$1,209,289 -$1,171,136
$0 $0 $0
-$1,712,000 -$535,573 $24,060
-$568,000 $338,109 $597,542
-$264,167 $853,909 $1,187,101
$0 $0 $0
$1,756,481 $5,683,079 $7,131,985
$4,053,224 $9,672,871 $11,906,376
-$8,000,000 $13,078,018 $17,915,233 $223,940,409
$195,797,691.20

<<< Output and Cost values taken from scenario tabs

2002 2003 2004
-$426,000 -$2,381,478 -$2,525,124
-$426,000 -$1,958,016 -$2,034,477
$0 $0 $0
-$1,284,000 -$3,348,923 -$3,174,378
-$426,000 -$687,629 -$562,534
 -$264,167 -$264,167 -$71,887
$0 $0 $0
$1,756,481 $1,756,481 $2,741,034
$4,053,224 $4,053,224 $5,639,662
-$6,000,000 -$2,830,507 $12,296 $153,703
-$7,850,483.72

<<< Output and Cost values taken from scenario tabs

2002 2003 2004
-$568,000 -$1,702,382 -$1,738,285
-$568,000 -$1,233,618 -$1,195,149
$0 $0 $0
-$1,712,000 -$892,441 -$328,163
-$568,000 $172,674 $434,260
-$264,167 $641,438 $977,396
$0 $0 $0
$1,756,481 $4,759,137 $6,220,071
$4,053,224 $8,248,603 $10,500,649
-$8,000,000 $9,993,411 $14,870,779 $185,884,743
$160,526,538.68
 ASSUMPTIONS / INPUTS
Scenario 1 - Optimistic Scenario 2
Iron P Utilization FBD Rate Iron P
Now -> YE 2001 90 85% 4 90
Future 2002 110 99% 4 100
Future 2003 120 99% 3.5 110
Future 2004 130 99% 3.5 120

Current Future Improvements

Anticipated Operational CIP
Mass Loss Yield Loss Downtime Yield Loss
Preheater 7.6% 5% 10% 0.29%
Hoppers 0% 0% 0% 0.29%
1st Reactor (CFB) 15% 7% 1% 0.29%
2nd Reactor (FBD) 10% 1% 1% 0.29%
Flash Heater 0% 7% 0% 0.29%
Discharge 0% 0% 3% 0.29%
Briquetting 0% 3% 1% 0.29%
15.3% 2.00%

2001
4hr cycle 100 Downtime
Inflow Mass Loss Yield Loss In [t/h] Out [t/h]
Preheater 7.6% 5% 144.1 133.2
Hoppers 0% 0% 126.5 126.5
PRODUCTION

1st Reactor (CFB) 15% 7% 126.5 107.5

2nd Reactor (FBD) 10% 1% 100.0 90.0
Flash Heater 0% 7% 89.1 89.1
Discharge 0% 0% 82.9 82.9
Briquetting 0% 3% 82.9 82.9
Outflow Final Output 80.4

Input p.a. 1,262,429

Output p.a. 704,104
HBI Ratio 1.79

Downtime Loss 107,678

Actual Output p.a. 596,426

Variable
Ores $28,338,234
MgO $1,408,036
INANCES

LNG $11,613,329
H2 $7,584,620
FINANCES
N2 $2,158,202
Elec. $3,153,648
Water $1,869,928
Ops $1,357,924

Fixed $20,790,000

Total Cost: $78,273,922

NS / INPUTS
Scenario 2 Scenario 3 - Worst Case
Utilization FBD Rate Iron P Utilization FBD Rate
85% 4 90 85% 4
85% 4 95 85% 4
99% 4 100 85% 4
99% 3.5 105 99% 3.8

uture Improvements COSTS

99% Variable Cost Cost [$/t]
Downtime Ores 26.50 Preheater
1% MgO 1.50 Hoppers
1% LNG 10.86 Preheater
1% H2 8.08 1st Reactor
1% N2 3.51 Discharge
1% Elec. 4.25 2nd Reactor
1% Water 2.52 2nd Reactor
1% Ops 1.83 2nd Reactor
6.8%
Fixed Cost 20.79 million p.a.

Scenario 1 - Option 2
2002 2003
15.3% 4hr cycle 100 Downtime 6.8% 3.5hr cycle 114.3
Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h] Yield Loss In [t/h]
6.66 5% 144.1 133.2 6.66 5% 164.7
0.00 0% 126.5 126.5 0.00 0% 144.6
7.53 7% 126.5 107.5 7.53 7% 144.6
0.90 1% 100.0 90.0 0.90 1% 114.3
6.24 7% 89.1 89.1 6.24 7% 101.8
0.00 0% 82.9 82.9 0.00 0% 94.7
2.49 3% 82.9 82.9 2.49 3% 94.7
Final Output 80.4 Final Output

t Input p.a. 1,262,428 t Input p.a.

t Output p.a. 704,103 t Output p.a.
<- case (pg.6) HBI Ratio 1.79 HBI Ratio

t Downtime Loss 47,833 t Downtime Loss

t Actual Output p.a. 656,270 t Actual Output p.a.

Variable Variable
Ores $31,181,636 Ores
MgO $1,549,315 MgO
LNG $12,778,587 LNG
H2 $8,345,646 H2
 N2 $2,374,752 N2
Elec. $3,470,079 Elec.
Water $2,057,553 Water
Ops $1,494,175 Ops

Fixed $20,790,000 Fixed

Total Cost: $84,041,744 Total Cost:

Cold Idle Cost -$6,000,000

2003 2004 (same as 2003)
Downtime 6.8% 3.5hr cycle 114.3 Downtime 6.8%
Out [t/h] Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h]
152.2 7.61 5% 164.7 152.2 7.61
144.6 0.00 0% 144.6 144.6 0.00
122.9 8.60 7% 144.6 122.9 8.60
102.9 1.03 1% 114.3 102.9 1.03
101.8 7.13 7% 101.8 101.8 7.13
94.7 0.00 0% 94.7 94.7 0.00
94.7 2.84 3% 94.7 94.7 2.84
91.9 Final Output 91.9

1,442,957 t Input p.a. 1,442,957 t

804,791 t Output p.a. 804,791 t
1.79 HBI Ratio 1.79

54,673 t Downtime Loss 54,673 t

750,118 t Actual Output p.a. 750,118 t

Variable
$35,640,641 Ores $35,640,641
$1,770,869 MgO $1,770,869
$14,605,938 LNG $14,605,938
$9,539,082 H2 $9,539,082
 $2,714,344 N2 $2,714,344
$3,966,304 Elec. $3,966,304
$2,351,785 Water $2,351,785
$1,707,844 Ops $1,707,844

$20,790,000 Fixed $20,790,000

$93,086,807 Total Cost: $93,086,807

 ASSUMPTIONS / INPUTS
Scenario 1 - Optimistic Scenario 2
Iron P Utilization FBD Rate Iron P
Now -> YE 2001 90 85% 4 90
Future 2002 110 99% 4 100
Future 2003 120 99% 3.5 110
Future 2004 130 99% 3.5 120

Current Future Improvements

Anticipated Operational CIP
Mass Loss Yield Loss Downtime Yield Loss
Preheater 7.6% 5% 10% 0.29%
Hoppers 0% 0% 0% 0.29%
1st Reactor (CFB) 15% 7% 1% 0.29%
2nd Reactor (FBD) 10% 1% 1% 0.29%
Flash Heater 0% 7% 0% 0.29%
Discharge 0% 0% 3% 0.29%
Briquetting 0% 3% 1% 0.29%
15.3% 2.00%

2001
4hr cycle 100 Downtime
Inflow Mass Loss Yield Loss In [t/h] Out [t/h]
Preheater 7.6% 5% 144.1 133.2
Hoppers 0% 0% 126.5 126.5
PRODUCTION

1st Reactor (CFB) 15% 7% 126.5 107.5

2nd Reactor (FBD) 10% 1% 100.0 90.0
Flash Heater 0% 7% 89.1 89.1
Discharge 0% 0% 82.9 82.9
Briquetting 0% 3% 82.9 82.9
Outflow Final Output 80.4

Input p.a. 1,262,429

Output p.a. 704,104
HBI Ratio 1.79

Downtime Loss 107,678

Actual Output p.a. 596,426

Variable
Ores $28,338,234
MgO $1,408,036
LNG $11,613,329
FINANCES

H2 $7,584,620
N2 $2,158,202
FINANCES
Elec. $3,153,648
Water $1,869,928
Ops $1,357,924

Fixed $20,790,000

Total Cost: $78,273,922

NS / INPUTS
Scenario 2 Scenario 3 - Worst Case
Utilization FBD Rate Iron P Utilization FBD Rate
85% 4 90 85% 4
85% 4 95 85% 4
99% 4 100 85% 4
99% 3.5 105 99% 3.8

uture Improvements COSTS

99% Variable Cost Cost [$/t]
Downtime Ores 26.50 Preheater
1% MgO 1.50 Hoppers
1% LNG 10.86 Preheater
1% H2 8.08 1st Reactor
1% N2 3.51 Discharge
1% Elec. 4.25 2nd Reactor
1% Water 2.52 2nd Reactor
1% Ops 1.83 2nd Reactor
6.8%
Fixed Cost 20.79 million p.a.

Scenario 1 - Option 3
2002 2003
15% 4hr cycle 100 Downtime 7% 3.5hr cycle 114.3 Downtime
Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h] Yield Loss In [t/h] Out [t/h]
6.66 5% 144.1 133.2 6.66 0.29% 146.8 135.6
0.00 0% 126.5 126.5 0.00 0.29% 135.2 135.2
7.53 7% 126.5 107.5 7.53 0.29% 134.9 114.6
0.90 1% 100.0 90.0 0.90 0.29% 114.3 102.9
6.24 7% 89.1 89.1 6.24 0.29% 102.6 102.6
0.00 0% 82.9 82.9 0.00 0.29% 102.3 102.3
2.49 3% 82.9 82.9 2.49 0.29% 102.0 102.0
Final Output 80.4 Final Output 101.7

t Input p.a. 1,262,428 t Input p.a. 1,285,842

t Output p.a. 704,103 t Output p.a. 890,887
<- case (pg.6) HBI Ratio 1.79 HBI Ratio 1.44

t Downtime Loss 47,833 t Downtime Loss 60,522

t Actual Output p.a. 656,270 t Actual Output p.a. 830,365

Variable Variable
Ores $31,181,636 Ores $31,759,957
MgO $1,549,315 MgO $1,656,360
LNG $12,778,587 LNG $13,015,590
H2 $8,345,646 H2 $8,896,765
N2 $2,374,752 N2 $2,931,308
 Elec. $3,470,079 Elec. $3,966,304
Water $2,057,553 Water $2,351,785
Ops $1,494,175 Ops $1,707,844

Fixed $20,790,000 Fixed $20,790,000

Total Cost: $84,041,744 Total Cost: $87,075,913

Cold Idle Cost -$6,000,000

Improvement Project Cost -$2,000,000
 2004 (same as 2003)
7% 3.5hr cycle 114.3 Downtime 7%
Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h]
0.39 0.29% 146.8 135.6 0.39
0.39 0.29% 135.2 135.2 0.39
0.33 0.29% 134.9 114.6 0.33
0.29 0.29% 114.3 102.9 0.29
0.29 0.29% 102.6 102.6 0.29
0.29 0.29% 102.3 102.3 0.29
0.29 0.29% 102.0 102.0 0.29
Final Output 101.7

t Input p.a. 1,285,842 t

t Output p.a. 890,887 t
HBI Ratio 1.44

t Downtime Loss 60,522 t

t Actual Output p.a. 830,365 t

Variable
Ores $31,759,957
MgO $1,656,360
LNG $13,015,590
H2 $8,896,765
N2 $2,931,308
 Elec. $3,966,304
Water $2,351,785
Ops $1,707,844

Fixed $20,790,000

Total Cost: $87,075,913

 ASSUMPTIONS / INPUTS
Scenario 1 - Optimistic Scenario 2
Iron P Utilization FBD Rate Iron P
Now -> YE 2001 90 85% 4 90
Future 2002 110 99% 4 100
Future 2003 120 99% 3.5 110
Future 2004 130 99% 3.5 120

Current Future Improvements

Anticipated Operational CIP
Mass Loss Yield Loss Downtime Yield Loss
Preheater 7.6% 5% 10% 0.29%
Hoppers 0% 0% 0% 0.29%
1st Reactor (CFB) 15% 7% 1% 0.29%
2nd Reactor (FBD) 10% 1% 1% 0.29%
Flash Heater 0% 7% 0% 0.29%
Discharge 0% 0% 3% 0.29%
Briquetting 0% 3% 1% 0.29%
15.3% 2.00%

2001
4hr cycle 100 Downtime
Inflow Mass Loss Yield Loss In [t/h] Out [t/h]
Preheater 7.6% 5% 144.1 133.2
Hoppers 0% 0% 126.5 126.5
PRODUCTION

1st Reactor (CFB) 15% 7% 126.5 107.5

2nd Reactor (FBD) 10% 1% 100.0 90.0
Flash Heater 0% 7% 89.1 89.1
Discharge 0% 0% 82.9 82.9
Briquetting 0% 3% 82.9 82.9
Outflow Final Output 80.4

Input p.a. 1,262,429

Output p.a. 704,104
HBI Ratio 1.79

Downtime Loss 107,678

Actual Output p.a. 596,426

Variable
Ores $28,338,234
MgO $1,408,036
INANCES

LNG $11,613,329
H2 $7,584,620
FINANCES
N2 $2,158,202
Elec. $3,153,648
Water $1,869,928
Ops $1,357,924

Fixed $20,790,000

Total Cost: $78,273,922

NS / INPUTS
Scenario 2 Scenario 3 - Worst Case
Utilization FBD Rate Iron P Utilization FBD Rate
85% 4 90 85% 4
85% 4 95 85% 4
99% 4 100 85% 4
99% 3.5 105 99% 3.8

uture Improvements COSTS

99% Variable Cost Cost [$/t]
Downtime Ores 26.50 Preheater
1% MgO 1.50 Hoppers
1% LNG 10.86 Preheater
1% H2 8.08 1st Reactor
1% N2 3.51 Discharge
1% Elec. 4.25 2nd Reactor
1% Water 2.52 2nd Reactor
1% Ops 1.83 2nd Reactor
6.8%
Fixed Cost 20.79 million p.a.

Scenario 2 - Option 2
2002 2003
15% 4hr cycle 100 Downtime 15% 4hr cycle 100
Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h] Yield Loss In [t/h]
6.66 5% 144.1 133.2 6.66 5% 144.1
0.00 0% 126.5 126.5 0.00 0% 126.5
7.53 7% 126.5 107.5 7.53 7% 126.5
0.90 1% 100.0 90.0 0.90 1% 100.0
6.24 7% 89.1 89.1 6.24 7% 89.1
0.00 0% 82.9 82.9 0.00 0% 82.9
2.49 3% 82.9 82.9 2.49 3% 82.9
Final Output 80.4 Final Output

t Input p.a. 1,262,428 t Input p.a.

t Output p.a. 704,103 t Output p.a.
<- case (pg.6) HBI Ratio 1.79 HBI Ratio

t Downtime Loss 107,678 t Downtime Loss

t Actual Output p.a. 596,426 t Actual Output p.a.

Variable Variable
Ores $28,338,206 Ores
MgO $1,408,035 MgO
LNG $11,613,318 LNG
H2 $7,584,613 H2
 N2 $2,158,200 N2
Elec. $3,153,645 Elec.
Water $1,869,926 Water
Ops $1,357,923 Ops

Fixed $20,790,000 Fixed

Total Cost: $78,273,866 Total Cost:

Cold Idle Cost -$6,000,000

2003 2004 (same as 2003)
Downtime 7% 3.5hr cycle 114.3 Downtime 7%
Out [t/h] Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h]
133.2 6.66 5% 164.7 152.2 7.61
126.5 0.00 0% 144.6 144.6 0.00
107.5 7.53 7% 144.6 122.9 8.60
90.0 0.90 1% 114.3 102.9 1.03
89.1 6.24 7% 101.8 101.8 7.13
82.9 0.00 0% 94.7 94.7 0.00
82.9 2.49 3% 94.7 94.7 2.84
80.4 Final Output 91.9

1,262,428 t Input p.a. 1,442,957 t

704,103 t Output p.a. 804,791 t
1.79 HBI Ratio 1.79

47,833 t Downtime Loss 54,673 t

656,270 t Actual Output p.a. 750,118 t

Variable
$31,181,636 Ores $35,640,641
$1,549,315 MgO $1,770,869
$12,778,587 LNG $14,605,938
$8,345,646 H2 $9,539,082
 $2,374,752 N2 $2,714,344
$3,470,079 Elec. $3,966,304
$2,057,553 Water $2,351,785
$1,494,175 Ops $1,707,844

$20,790,000 Fixed $20,790,000

$84,041,744 Total Cost: $93,086,807

 ASSUMPTIONS / INPUTS
Scenario 1 - Optimistic Scenario 2
Iron P Utilization FBD Rate Iron P
Now -> YE 2001 90 85% 4 90
Future 2002 110 99% 4 100
Future 2003 120 99% 3.5 110
Future 2004 130 99% 3.5 120

Current Future Improvements

Anticipated Operational CIP
Mass Loss Yield Loss Downtime Yield Loss
Preheater 7.6% 5% 10% 0.29%
Hoppers 0% 0% 0% 0.29%
1st Reactor (CFB) 15% 7% 1% 0.29%
2nd Reactor (FBD) 10% 1% 1% 0.29%
Flash Heater 0% 7% 0% 0.29%
Discharge 0% 0% 3% 0.29%
Briquetting 0% 3% 1% 0.29%
15.3% 2.00%

2001
4hr cycle 100 Downtime
Inflow Mass Loss Yield Loss In [t/h] Out [t/h]
Preheater 7.6% 5% 144.1 133.2
Hoppers 0% 0% 126.5 126.5
PRODUCTION

1st Reactor (CFB) 15% 7% 126.5 107.5

2nd Reactor (FBD) 10% 1% 100.0 90.0
Flash Heater 0% 7% 89.1 89.1
Discharge 0% 0% 82.9 82.9
Briquetting 0% 3% 82.9 82.9
Outflow Final Output 80.4

Input p.a. 1,262,429

Output p.a. 704,104
HBI Ratio 1.79

Downtime Loss 107,678

Actual Output p.a. 596,426

Variable
Ores $28,338,234
MgO $1,408,036
INANCES

LNG $11,613,329
H2 $7,584,620
FINANCES
N2 $2,158,202
Elec. $3,153,648
Water $1,869,928
Ops $1,357,924

Fixed $20,790,000

Total Cost: $78,273,922

NS / INPUTS
Scenario 2 Scenario 3 - Worst Case
Utilization FBD Rate Iron P Utilization FBD Rate
85% 4 90 85% 4
85% 4 95 85% 4
99% 4 100 85% 4
99% 3.5 105 99% 3.8

uture Improvements COSTS

99% Variable Cost Cost [$/t]
Downtime Ores 26.50 Preheater
1% MgO 1.50 Hoppers
1% LNG 10.86 Preheater
1% H2 8.08 1st Reactor
1% N2 3.51 Discharge
1% Elec. 4.25 2nd Reactor
1% Water 2.52 2nd Reactor
1% Ops 1.83 2nd Reactor
6.8%
Fixed Cost 20.79 million p.a.

Scenario 2 - Option 3
2002 2003
15% 4hr cycle 100 Downtime 15% 4hr cycle 100 Downtime
Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h] Yield Loss In [t/h] Out [t/h]
6.66 5% 144.1 133.2 6.66 0.29% 128.4 118.7
0.00 0% 126.5 126.5 0.00 0.29% 118.3 118.3
7.53 7% 126.5 107.5 7.53 0.29% 118.0 100.3
0.90 1% 100.0 90.0 0.90 0.29% 100.0 90.0
6.24 7% 89.1 89.1 6.24 0.29% 89.7 89.7
0.00 0% 82.9 82.9 0.00 0.29% 89.5 89.5
2.49 3% 82.9 82.9 2.49 0.29% 89.2 89.2
Final Output 80.4 Final Output 89.0

t Input p.a. 1,262,428 t Input p.a. 1,124,970

t Output p.a. 704,103 t Output p.a. 779,428
<- case (pg.6) HBI Ratio 1.79 HBI Ratio 1.44

t Downtime Loss 107,678 t Downtime Loss 52,950

t Actual Output p.a. 596,426 t Actual Output p.a. 726,478

Variable Variable
Ores $28,338,206 Ores $27,786,465
MgO $1,408,035 MgO $1,449,132
LNG $11,613,318 LNG $11,387,208
H2 $7,584,613 H2 $7,783,690
 N2 $2,158,200 N2 $2,564,572
Elec. $3,153,645 Elec. $3,470,079
Water $1,869,926 Water $2,057,553
Ops $1,357,923 Ops $1,494,175

Fixed $20,790,000 Fixed $20,790,000

Total Cost: $78,273,866 Total Cost: $78,782,874

Cold Idle Cost -$6,000,000

Improvement Project Cost -$2,000,000
 2004 (same as 2003)
7% 3.5hr cycle 114.3 Downtime 7%
Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h]
0.34 0.29% 146.8 135.6 0.39
0.34 0.29% 135.2 135.2 0.39
0.29 0.29% 134.9 114.6 0.33
0.26 0.29% 114.3 102.9 0.29
0.26 0.29% 102.6 102.6 0.29
0.26 0.29% 102.3 102.3 0.29
0.25 0.29% 102.0 102.0 0.29
Final Output 101.7

t Input p.a. 1,285,842 t

t Output p.a. 890,887 t
HBI Ratio 1.44

t Downtime Loss 60,522 t

t Actual Output p.a. 830,365 t

Variable
Ores $31,759,957
MgO $1,656,360
LNG $13,015,590
H2 $8,896,765
 N2 $2,931,308
Elec. $3,966,304
Water $2,351,785
Ops $1,707,844

Fixed $20,790,000

Total Cost: $87,075,913

 ASSUMPTIONS / INPUTS
Scenario 1 - Optimistic Scenario 2
Iron P Utilization FBD Rate Iron P
Now -> YE 2001 90 85% 4 90
Future 2002 110 99% 4 100
Future 2003 120 99% 3.5 110
Future 2004 130 99% 3.5 120

Current Future Improvements

Anticipated Operational CIP
Mass Loss Yield Loss Downtime Yield Loss
Preheater 7.6% 5% 10% 0.29%
Hoppers 0% 0% 0% 0.29%
1st Reactor (CFB) 15% 7% 1% 0.29%
2nd Reactor (FBD) 10% 1% 1% 0.29%
Flash Heater 0% 7% 0% 0.29%
Discharge 0% 0% 3% 0.29%
Briquetting 0% 3% 1% 0.29%
15.3% 2.00%

2001
4hr cycle 100 Downtime
Inflow Mass Loss Yield Loss In [t/h] Out [t/h]
Preheater 7.6% 5% 144.1 133.2
Hoppers 0% 0% 126.5 126.5
PRODUCTION

1st Reactor (CFB) 15% 7% 126.5 107.5

2nd Reactor (FBD) 10% 1% 100.0 90.0
Flash Heater 0% 7% 89.1 89.1
Discharge 0% 0% 82.9 82.9
Briquetting 0% 3% 82.9 82.9
Outflow Final Output 80.4

Input p.a. 1,262,429

Output p.a. 704,104
HBI Ratio 1.79

Downtime Loss 107,678

Actual Output p.a. 596,426

Variable
Ores $28,338,234
MgO $1,408,036
INANCES

LNG $11,613,329
H2 $7,584,620
FINANCES
N2 $2,158,202
Elec. $3,153,648
Water $1,869,928
Ops $1,357,924

Fixed $20,790,000

Total Cost: $78,273,922

NS / INPUTS
Scenario 2 Scenario 3 - Worst Case
Utilization FBD Rate Iron P Utilization FBD Rate
85% 4 90 85% 4
85% 4 95 85% 4
99% 4 100 85% 4
99% 3.5 105 99% 3.8

uture Improvements COSTS

99% Variable Cost Cost [$/t]
Downtime Ores 26.50 Preheater
1% MgO 1.50 Hoppers
1% LNG 10.86 Preheater
1% H2 8.08 1st Reactor
1% N2 3.51 Discharge
1% Elec. 4.25 2nd Reactor
1% Water 2.52 2nd Reactor
1% Ops 1.83 2nd Reactor
6.8%
Fixed Cost 20.79 million p.a.

Scenario 3 - Option 2
2002 2003
15% 4hr cycle 100 Downtime 15% 4hr cycle 100
Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h] Yield Loss In [t/h]
6.66 5% 144.1 133.2 6.66 5% 144.1
0.00 0% 126.5 126.5 0.00 0% 126.5
7.53 7% 126.5 107.5 7.53 7% 126.5
0.90 1% 100.0 90.0 0.90 1% 100.0
6.24 7% 89.1 89.1 6.24 7% 89.1
0.00 0% 82.9 82.9 0.00 0% 82.9
2.49 3% 82.9 82.9 2.49 3% 82.9
Final Output 80.4 Final Output

t Input p.a. 1,262,428 t Input p.a.

t Output p.a. 704,103 t Output p.a.
<- case (pg.6) HBI Ratio 1.79 HBI Ratio

t Downtime Loss 107,678 t Downtime Loss

t Actual Output p.a. 596,426 t Actual Output p.a.

Variable Variable
Ores $28,338,206 Ores
MgO $1,408,035 MgO
LNG $11,613,318 LNG
H2 $7,584,613 H2
 N2 $2,158,200 N2
Elec. $3,153,645 Elec.
Water $1,869,926 Water
Ops $1,357,923 Ops

Fixed $20,790,000 Fixed

Total Cost: $78,273,866 Total Cost:

Cold Idle Cost -$6,000,000

2003 2004 (same as 2003)
Downtime 15% 3.8hr cycle 105.3 Downtime 7%
Out [t/h] Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h]
133.2 6.66 5% 151.8 140.2 7.01
126.5 0.00 0% 133.2 133.2 0.00
107.5 7.53 7% 133.2 113.2 7.93
90.0 0.90 1% 105.3 94.8 0.95
89.1 6.24 7% 93.8 93.8 6.57
82.9 0.00 0% 87.3 87.3 0.00
82.9 2.49 3% 87.3 87.3 2.62
80.4 Final Output 84.6

1,262,428 t Input p.a. 1,329,337 t

704,103 t Output p.a. 741,421 t
1.79 HBI Ratio 1.79

107,678 t Downtime Loss 50,368 t

596,426 t Actual Output p.a. 691,053 t

Variable
$28,338,206 Ores $32,834,262
$1,408,035 MgO $1,631,429
$11,613,318 LNG $13,455,852
$7,584,613 H2 $8,787,965
 $2,158,200 N2 $2,500,614
$3,153,645 Elec. $3,653,993
$1,869,926 Water $2,166,603
$1,357,923 Ops $1,573,367

$20,790,000 Fixed $20,790,000

$78,273,866 Total Cost: $87,394,086

 ASSUMPTIONS / INPUTS
Scenario 1 - Optimistic Scenario 2
Iron P Utilization FBD Rate Iron P
Now -> YE 2001 90 85% 4 90
Future 2002 110 99% 4 100
Future 2003 120 99% 3.5 110
Future 2004 130 99% 3.5 120

Current Future Improvements

Anticipated Operational CIP
Mass Loss Yield Loss Downtime Yield Loss
Preheater 7.6% 5% 10% 0.29%
Hoppers 0% 0% 0% 0.29%
1st Reactor (CFB) 15% 7% 1% 0.29%
2nd Reactor (FBD) 10% 1% 1% 0.29%
Flash Heater 0% 7% 0% 0.29%
Discharge 0% 0% 3% 0.29%
Briquetting 0% 3% 1% 0.29%
15.3% 2.00%

2001
4hr cycle 100 Downtime
Inflow Mass Loss Yield Loss In [t/h] Out [t/h]
Preheater 7.6% 5% 144.1 133.2
Hoppers 0% 0% 126.5 126.5
PRODUCTION

1st Reactor (CFB) 15% 7% 126.5 107.5

2nd Reactor (FBD) 10% 1% 100.0 90.0
Flash Heater 0% 7% 89.1 89.1
Discharge 0% 0% 82.9 82.9
Briquetting 0% 3% 82.9 82.9
Outflow Final Output 80.4

Input p.a. 1,262,429

Output p.a. 704,104
HBI Ratio 1.79

Downtime Loss 107,678

Actual Output p.a. 596,426

Variable
Ores $28,338,234
MgO $1,408,036
INANCES

LNG $11,613,329
H2 $7,584,620
FINANCES
N2 $2,158,202
Elec. $3,153,648
Water $1,869,928
Ops $1,357,924

Fixed $20,790,000

Total Cost: $78,273,922

NS / INPUTS
Scenario 2 Scenario 3 - Worst Case
Utilization FBD Rate Iron P Utilization FBD Rate
85% 4 90 85% 4
85% 4 95 85% 4
99% 4 100 85% 4
99% 3.5 105 99% 3.8

uture Improvements COSTS

99% Variable Cost Cost [$/t]
Downtime Ores 26.50 Preheater
1% MgO 1.50 Hoppers
1% LNG 10.86 Preheater
1% H2 8.08 1st Reactor
1% N2 3.51 Discharge
1% Elec. 4.25 2nd Reactor
1% Water 2.52 2nd Reactor
1% Ops 1.83 2nd Reactor
6.8%
Fixed Cost 20.79 million p.a.

Scenario 3 - Option 3
2002 2003
15% 4hr cycle 100 Downtime 15% 4hr cycle 100 Downtime
Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h] Yield Loss In [t/h] Out [t/h]
6.66 5% 144.1 133.2 6.66 0.29% 128.4 118.7
0.00 0% 126.5 126.5 0.00 0.29% 118.3 118.3
7.53 7% 126.5 107.5 7.53 0.29% 118.0 100.3
0.90 1% 100.0 90.0 0.90 0.29% 100.0 90.0
6.24 7% 89.1 89.1 6.24 0.29% 89.7 89.7
0.00 0% 82.9 82.9 0.00 0.29% 89.5 89.5
2.49 3% 82.9 82.9 2.49 0.29% 89.2 89.2
Final Output 80.4 Final Output 89.0

t Input p.a. 1,262,428 t Input p.a. 1,124,970

t Output p.a. 704,103 t Output p.a. 779,428
<- case (pg.6) HBI Ratio 1.79 HBI Ratio 1.44

t Downtime Loss 107,678 t Downtime Loss 119,197

t Actual Output p.a. 596,426 t Actual Output p.a. 660,231

Variable Variable
Ores $28,338,206 Ores $25,252,639
MgO $1,408,035 MgO $1,316,987
LNG $11,613,318 LNG $10,348,817
H2 $7,584,613 H2 $7,073,901
 N2 $2,158,200 N2 $2,330,710
Elec. $3,153,645 Elec. $3,153,645
Water $1,869,926 Water $1,869,926
Ops $1,357,923 Ops $1,357,923

Fixed $20,790,000 Fixed $20,790,000

Total Cost: $78,273,866 Total Cost: $73,494,549

Cold Idle Cost -$6,000,000

Improvement Project Cost -$2,000,000
 2004 (same as 2003)
15% 3.8hr cycle 105.3 Downtime 7%
Yield L [t/h] Yield Loss In [t/h] Out [t/h] Yield L [t/h]
0.34 0.29% 135.2 125.0 0.36
0.34 0.29% 124.6 124.6 0.36
0.29 0.29% 124.2 105.6 0.30
0.26 0.29% 105.3 94.8 0.27
0.26 0.29% 94.5 94.5 0.27
0.26 0.29% 94.2 94.2 0.27
0.25 0.29% 94.0 94.0 0.27
Final Output 93.7

t Input p.a. 1,184,592 t

t Output p.a. 820,737 t
HBI Ratio 1.44

t Downtime Loss 55,756 t

t Actual Output p.a. 764,981 t

Variable
Ores $29,259,115
MgO $1,525,935
LNG $11,990,716
H2 $8,196,216
 N2 $2,700,491
Elec. $3,653,989
Water $2,166,601
Ops $1,573,365

Fixed $20,790,000

Total Cost: $81,856,428