Process Infrastructure

1943-G-G-001Revision Number C

ArcelorMittal

Mt Reed to Port Cartier Iron Concentrate Pipeline Conceptual StudyStudy ReportApril 201106-Apr-11

Revision StatusRevision Date Description Author Checked By Approved By

C 06-Apr-11 Issued to Incorporate Client Comments RT APS APS

B 29-Mar-11 Issued for Client Review RT PMW APS

A 29-Mar-11 Issued for Internal Review RT APS ---

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Contents1 Introduction 11.1 Scope of Work 11.2 Purpose of This Document 1

2 Executive Summary 32.1 Study Conclusions 42.2 Recommendations for Future Work 4

3 Route Description 54 System Design Criteria 74.1 Battery Limits 74.2 Slurry System Design Criteria 74.3 Process Design Criteria 84.4 Pipeline Mechanical Design Criteria 94.5 General Study Assumptions 9

5 Hydraulic Design 105.1 Pipeline Design Philosophy 105.2 Pipe Diameter Selection 105.3 Operating Velocity 105.4 Agitated Storage Tanks 105.5 Hydraulic Design 11

6 Pipeline Systems Description 146.1 Selected System 146.2 Slurry Pipeline 146.3 Pump Selection 156.4 Pump Station 1 – Mine Site 156.5 Intermediate Pump Station – PS 2 166.6 Monitoring Stations 176.7 Terminal Station 176.8 Pipeline Slope Restrictions 186.9 Pipeline Crossings 186.10 Cathodic Protection 186.11 Leak Detection 186.12 SCADA System 196.13 Telecommunications 19

7 Operating and Control Philosophy 207.1 Start-up 207.2 Normal Operating and Control Philosophy 20

8 Capital Cost Estimate 218.1 Summary 218.2 Material Costs 218.3 Pipeline Construction 218.4 Recommendation for Next Project Phase 22

9 Operating Cost Estimate 269.1 Operating Cost Basis 26

10 Comparison with Commercial Pipeline Operations 28

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11 Project Execution Plan 2911.1 Project Implementation 2911.2 Schedule 30

Appendix 1 – Process Flow DiagramsAppendix 2 – Pipeline Facilities PhotographsAppendix 3 – Concept LayoutsAppendix 4 – Vendor QuotationsAppendix 5 – Railway Route Profile – Port Cartier to Mont Wright

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1 Introduction

ArcelorMittal has iron ore mines in Mont Wright, Mt Reed and Fire Lake in Northern Quebec, and operates a pellet plant in Port-Cartier. The renewed interest toward pipeline expansion projects is driven by the ambitious objective of ArcelorMittal for a higher degree of self-sufficiency in iron ore. As a result of the high cost of railroad expansion, operating costs, and other related expenses, ArcelorMittal would like to compare the cost and feasibility of pipeline transport of iron concentrate from Mt Reed to the port at Port-Cartier versus rail transport.

In March 2011 ArcelorMittal awarded Ausenco PSI a conceptual study for an iron concentrate pipeline system from the concentrator at Mt Reed to Port-Cartier at a throughput of 24 Mt/y. The length of the pipeline from Mt Reed to Port-Cartier, Quebec is about 330 km. Ausenco PSI has also been asked to provide a conceptual level estimate of the capital and operating costs for the pipeline.

1.1 Scope of Work

The scope of work includes the development of a conceptual design and associated capital and operating costs including the following:

Preliminary hydraulic analysis

Overview of project showing selected route using Google Earth.

Preliminary PFDs

Overview of project execution plan including overall schedule

Preliminary pump specification (type, head, flow, power)

Preliminary pipe specification (size, material, pressure rating, tonnage, coating, liner (if required) and construction / installation method)

Order of magnitude capital cost based upon similar systems and broken down in a form to allow ArcelorMittal to further develop supply and installation costs

Operating cost estimate

1.2 Purpose of This Document

This study includes all system components related to the pipeline transportation system including:

Agitated storage tanks at mine site and terminal station

Iron concentrate slurry pipeline transport system

Pressure monitoring stations

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Ancillary facilities including control and telecommunication systems

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2 Executive Summary

The following tables summarize the pipeline system.

Table 2-1: System Summary

Design Parameters

Average Annual Throughput, Mt/y 24

Slurry Pipeline Design Throughput, t/h, @ 95% Availability 2884

Design Slurry Concentration, wt % solids 65

Pipeline Design Flow Rate, m3/h 2257

Pipe Diameter, inches 28

Pipe Material Steel, API 5L X70

Pipeline Length, km (miles) 330 (205)

Pipe Steel Weight, t 66,920

Total Number of Pump Stations 2

Table 2-2: Station Summary

Station Mine Site / PS 1 PS2 Terminal

Distance from Mine site, KP 0 130 330

Distance from Terminal, MP 205 124 0

Slurry Tanks (20 m diameter X 20 m high) 4 1 4

Water Tanks (12 m diameter X 12 m high) 1 1 0

Pump Type Positive Displacement

Mainline Pump Quantity 3 operating +1 stand-by

3 operating +1 stand-by N/A

Pump Station Discharge Pressure, MPa (psi) 8.0 (1160) 8.4 (1220) N/A

Pump Operating Power, kW (HP) 5585 (7490) 5865 (7860) N/A

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Water Receiving Pond No Yes Yes

Table 2-3: Capital and Operating Cost Summary

Cost

Capital Cost (Million USD) 811.3

Operating Cost (Million USD/y) 11.6

2.1 Study Conclusions

The proposed pipeline system for the Arcelor Mittal iron concentrate pipeline is technically feasible. Existing mineral slurry pipelines have operated successfully and have demonstrated that, with qualified personnel and adherence to operating procedures and maintenance programs, high reliabilities can be achieved in comparison with other transportation methods such as railroad or trucking. In addition, pipeline operation is minimally affected by weather, and traffic accidents can be eliminated.

The selected system is adequately conservative such that it should be able to withstand normal design changes as the project advances. Opportunities for optimization have been identified which can be pursued in future phases of the project.

2.2 Recommendations for Future Work

The following issues should be addressed further in future phases:

Validate slurry characteristics by testing a sample from the site under study

Investigate a revised PSD of 70% passing 325 mesh compared to the PSD of 83% used in this study to eliminate the need for regrinding

Field visit by Ausenco PSI route specialist to identify best possible routes and analyse constructability access issues for the selected route. The railway right of way width, track location, fibre optic cable location, and any other buried utilities should be determined. A geotechnical report is recommended in future phases to determine amount and type of rock along the route.

Optimize pipe diameter, and pumping requirements once the slurry characterization has been completed and the pipeline throughput range and route has been finalized.

Perform transient analysis to optimize steel requirements and provide necessary equipment for pressure containment for normal operation and emergency conditions

Review storage tank requirements in conjunction with likely production variability

Evaluate station and pipeline construction costs:

o Working conditions and local costs

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o Capabilities of local contractors

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3 Route Description

The pipeline route from the concentrator at Mt Reed is shown in Figure 3-1. The pipeline heads East from Mt Reed for approximately 22 km (14 miles) where it intersects with the existing Mt Wright-Port Cartier Railway at rail MP 191. It then follows the railway south to Port Cartier. Total pipeline length is about 330 km (205 miles). Refer to the Port Cartier to Mont-Wright railway route profile in Appendix 5.

The initial 22 km (14 miles) section is cross-country through hilly terrain with many lakes and streams. The balance of the route parallels the railway from rail MP 191 to MP 0. There are several areas along the railway where the right-of-way is quite narrow.

Figure 3-1: Slurry Pipeline Route

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The pipeline starts at an elevation of 577m, has intermediate high points of 677m at KP 78.6 (rail MP 156) and 570 m at KP 215 (rail MP 71), and then descends to an elevation of 18 m at the terminal, as shown in Table 3-1.

Table 3-1 – Pipeline Elevations

KP Rail MP Elevation (m)

0 577

22 191 530

78.6 156 677

215 71 570

330 0 18

Pipeline route optimizations should be performed in the next phase of the project to better define the pipeline corridor. Early identification of rocky areas, steeply sloping areas, and water crossings will allow reduction of construction costs. The objective of optimizing the pipeline route is to minimize length, eliminate potential environmental impacts and assure engineering criteria are met. Pipeline route investigations, including field surveys and GIS engineering analysis, should be performed with this purpose.

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4 System Design Criteria

The design basis for the pipeline was prepared using data provided by ArcelorMittal and complemented with Ausenco PSI’s in-house information from similar commercial operations.

Key elements of the Design Basis for this project have been summarized in the sections below.

4.1 Battery Limits

Ausenco PSI’s scope starts at the inlet of the slurry agitated storage tanks at the mine site pump station and ends at the discharge of the agitated storage tanks at the terminal station.

Refer to the Process Flow Diagrams in Appendix 1.

4.2 Slurry System Design Criteria

4.2.1 Slurry Characteristics

Ausenco PSI used in house data for this phase of the project.

Table 4-1 summarizes the slurry characteristics.

Table 4-1 - Slurry Characteristics

Parameter Value

Solids SG 5.0

Slurry pH 10

Slurry Temperature, o C 25

Viscosity, cP 9

Particle Size Distribution (mesh – Cum. % Passing) 100 mesh – 99% - 100%

150 mesh – 99% - 100%

200 mesh – 97% - 100%

270 mesh – 90% - 94%

325 mesh – 80% - 85%

Concentration by Weight (wt %) 65

4.2.2 Slurry System Throughput

Table 4-2 presents throughput and flow rate at design transport concentration for the slurry pipeline design. The hourly design throughput for the pipeline assumes 95% availability based on a typical multiple pump station system.

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Table 4-2 - Slurry System Throughput

Parameter Pipeline System

Throughput, Mt/y 24

Throughput, tph 2884

Flow Rate at 65 wt%, m3/h 2257

4.2.3 Pipeline Life

The slurry pipeline is designed for a 20 year life. Experience shows that pipeline life can be extended with proper ongoing maintenance – this merely represents the economic life for evaluation and design of system components.

4.2.4 Pump Selection:

Pumps used for slurry transportation generally fall into two categories:

Centrifugal type

Positive displacement type

Centrifugal pumps are ideally suited for low discharge pressure design conditions (up to 50-60 bar). Many long distance slurry pipelines utilize positive displacement pumps due to the higher discharge pressure requirements (up to 250 bar).

4.3 Process Design Criteria

The following design criteria were used to develop the hydraulic model for the concentrate slurry pipeline. These criteria are the same for the design of all pipelines at the conceptual study level and will be refined in future phases of work.

For slurry flows, pressure loss calculations will be determined from Ausenco PSI’s proprietary slurry hydraulic computer model, Ausenco PSI-WASP 1.1.

A design factor of 6% for flow is used for the hydraulic design to account for variations in slurry characteristics and general operations variability. This is equivalent to a design factor of approximately 12% for pressure loss.

A 5% design factor on pipeline length is included to account for deviations/optimizations in the final pipeline route.

The minimum clearance between the hydraulic gradient line and the pipeline profile is 50 m.

The minimum clearance between the hydraulic gradient line and the maximum allowable operating pressure (MAOP) line is 50 m.

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4.4 Pipeline Mechanical Design Criteria

The pipeline will be designed in accordance with the mechanical design criteria specified below:

Code for Slurry ASME B31.11, Slurry Transportation Piping Systems

Pipe Carbon Steel, API-5L, Grade X70 for slurry (no lining will be used)

Pipe Design Factor 0.80 of Specified Minimum Yield Stress (SMYS)

Transient Pressure Factor 1.10 times maximum allowable operating pressure

4.5 General Study Assumptions

It is assumed that electric power and fresh water suitable for gland seal water is available at all station locations.

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5 Hydraulic Design

5.1 Pipeline Design Philosophy

The hydraulic design of the ArcelorMittal pipeline is based on a conservative sizing of equipment and facilities because of the safety factors required to design a system without specific slurry data. It is possible that future engineering optimization will improve the facility design.

5.2 Pipe Diameter Selection

Selection of a pipeline diameter is based on commercial operations for slurries with similar solids specific gravity and particle size distribution. Various pipe diameters were reviewed to avoid particle deposition and optimize friction losses (pump duty). For the desired throughput, 26, 28 and 30 inch diameter pipes were considered. The velocity of flow in the 30-inch pipe was less than the minimum safe velocity and hence cannot be used except with slurry - water batching. A 26-inch diameter requires higher pumping pressures. A 28-inch diameter pipe was selected as the operating velocity was above the minimum safe operating velocity and the pressures were lower than in the 26” pipeline.

For the 28” pipeline option two scenarios were evaluated:

One pump station system

Two pump station system

5.3 Operating Velocity

The minimum safe operating velocity for a concentrate pipeline is intended to maintain pseudo-homogeneous flow behaviour in order to avoid unstable pipeline operation resulting from deposition of particles. The pipeline should operate in turbulent flow regime. The transition velocity is the point of transition from laminar to turbulent flow in the pipeline. The minimum safe operating velocity is based on deposition velocity as well as on transition velocity evaluations. Ausenco PSI uses an in-house model to calculate both the transition and deposition velocities. The greater of these two values, with adequate margin, was selected as the minimum safe operating velocity for each pipe size.

The minimum safe operating velocity calculated at 65% Cw is about 1.5 meters per second (m/s). The design velocity in the 28” pipe is about 1.7 to 1.8 m/s depending on wall thickness of the pipeline section which is slightly above the minimum safe velocity and significantly less than the maximum allowable velocity of 3 m/s to allow some flexibility in operation. At velocities above 3 m/s erosion of the pipeline can occur.

5.4 Agitated Storage Tanks

The agitated storage tanks at the start of the slurry pipeline receive slurry from the beneficiation plant thickeners. Slurry from these tanks is transported via the slurry pipeline to the next pump station or to the terminal. If slurry flow from the thickeners is interrupted, slurry in the tanks provides feed for the slurry pipeline. If problems occur with the slurry pipeline, the storage tanks continue to

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receive slurry from the thickeners for a limited time. Storage volume is established based on the amount of time required to react to operating problems. The objective is to avoid facility shutdowns for short-term upsets (e.g., 6 to 8 hours).\

Based on an 8 hour storage requirement, four 20m high x 20 m diameter tanks each were selected at the head station and terminal.

One 20m high x 20m diameter tank was selected at the intermediate pump station. This tank will be used during pipeline re-start after a shutdown to agitate the slurry and re-suspend the solids.

5.5 Hydraulic Design

The hydraulic gradient is a graphical illustration of the head in meters at any point in the pipeline. The hydraulic gradient must stay above the pipeline profile with at least 50 m clearance in order to avoid slack flow. If the gradient line is too close to the profile, slack flow can occur (the pipeline runs partially full creating high operating velocity at the bottom of the pipe), which can result in premature pipeline failure due to erosion.

The pipeline system will transport 24 Mt/y iron concentrate from mine to terminal. The hydraulic design developed for this system is a DN700 (28” OD) API 5L X70 pipeline with either one or two pump stations.

Option 1 has a single pump station with 6 positive displacement pumps operating in parallel with 1 standby unit.

Option 2 has two pump stations, each with 3 operating and 1 standby unit.

The ground profile, hydraulic gradient and maximum allowable operating pressure at 24 Mt/y for Option 1 is presented in Figure 5-1. Option 2 is presented in Figure 5-2.

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Figure 5-1 –Hydraulic Profile: Option 1, 28”, 24 Mt/y Iron Concentrate Pipeline – 1 Pump Station

1943 - MT Reed To PortCartier Arcelor Mittal - 24 Mt/y - 28" Pipeline - 1PS OptionSlurry Characteristics Solids S.G. 5Temp (°C) 25B' 2.60Von Karman 0.9Durand 80

Slurry viscosity 9.2Slurry SG 2.08

Particle Size Distribution65 99.70

100 99.82150 99.30200 97.82270 90.97325 83.31

Pipeline Life 20 yrCorrosion Rate (0-20 km) 6 mpyCorrosion Rate (20-End km) 4 mpy

Length Pipe 330.00 kmSteel Tonnage 96,583 mt

API5L X 70Pipeline CharacteristicsOD (inch) Section 1 28.000Avg wall thickness (inch) 0.641Rubber Liner (inch) 0.000ID (inch) 26.718Roughness (inch) 0.002000Availability (%) 95.00%

OD (inch) Section 2 28.000Pipeline Throughput Line Velocity MAOP Clearance Flowrate 2257.4 m³/h Minimum 1.68 m/s Minimum 124 mCw% 65.0% 30.4% Maximum 1.80 m/s Maximum 832 m

Throughput 2883.9 tphAnnual Throughput 24.00 MTA Hydraulic Gradient Chokes

Minimum 3.40 m/km Chokes Station 1 0 mPumping Requirements PS 1 PS2 PS3 Maximum 3.97 m/km Chokes Station 2 200 mPS location 0.0 KMTDH 837.1 mDischarge Pressure 2564 psig Profile Clearance Terminal

17666 kPa Minimum 86.8 m Tank 20.0 m176.664 Bar Maximum 881.1 m

Pump Efficiency 95%Motor HP 16567 HP Flow SF 1.06Motor kW 12354 kW Length Factor 1.05

0

200

400

600

800

1000

1200

1400

1600

1800

0 50 100 150 200 250 300 350

Ele

vatio

n (m

)

Length (km)

Hydraulic Gradient Line "End of Life" Maximum Allowable Operating Pressure Land Profile Static Pressure Line

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Figure 5-2 –Hydraulic Profile: Option 2, 28”, 24 Mt/y Iron Concentrate Pipeline – 2 Pump Stations

1943 - MT Reed To PortCartier Arcelor Mittal - 24 Mt/y - 28" Pipeline - 2PS OptionSlurry Characteristics Solids S.G. 5Temp (°C) 25B' 2.60Von Karman 0.9Durand 80

Slurry viscosity 9.2Slurry SG 2.08

Particle Size Distribution65 99.70100 99.82150 99.30200 97.82270 90.97325 83.31

Pipeline Life 20 yrCorrosion Rate (0-20 km) 6 mpyCorrosion Rate (20-End km) 4 mpy

Length Pipe 330.00 kmSteel Tonnage 66,920 mt

API5L X 70Pipeline CharacteristicsOD (inch) Section 1 28.000Avg wall thickness (inch) 0.441Rubber Liner (inch) 0.000ID (inch) 27.118Roughness (inch) 0.002000Availability (%) 95.00%

OD (inch) Section 2 28.000Pipeline Throughput Line Velocity MAOP Clearance Flowrate 2257.4 m³/h Minimum 1.65 m/s Minimum 65 mCw% 65.0% 30.4% Maximum 1.73 m/s Maximum 663 mThroughput 2883.9 tphAnnual Throughput 24.00 MTA Hydraulic Gradient Chokes

Minimum 3.25 m/km Chokes Station 1 20 mPumping Requirements PS 1 PS2 PS3 Maximum 3.63 m/km Chokes Station 2 200 mPS location 0.0 130.0 KMTDH 362.0 381.5 mDischarge Pressure 1159 1217 psig Profile Clearance Terminal

7987 8383 kPa Minimum 20.0 m Tank 20.0 m79.874 83.834 Bar Maximum 411.5 m

Pump Efficiency 95% 95%Motor HP 7490 7862 HP Flow SF 1.06Motor kW 5586 5863 kW Length Factor 1.05

0

200

400

600

800

1000

1200

0 50 100 150 200 250 300 350

Ele

vatio

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Hydraulic Gradient Line "End of Life" Maximum Allowable Operating Pressure Land Profile Static Pressure Line

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6 Pipeline Systems Description

6.1 Selected System

Capital costs were estimated for Options 1 and 2 and are presented in Section 8. Operating costs are very similar for each option.

Option 2 was selected because its capital cost is about USD 49.5 million lower than Option 1.

The sections below describe the selected Option 2

6.2 Slurry Pipeline

Pipeline materials and construction are selected to optimize initial cost, operating cost, operating life and hydraulic performance of the pipeline. The pipeline is designed to have adequate steel wall thickness to withstand the steady state slurry hydraulic gradient, and static head when the line is shutdown on slurry.

The recommended pipe for the slurry pipeline is DN700 (28” OD) API 5L GrX70, high strength carbon steel. The wall thickness varies from 7.9 mm (0.312”) to 15.9 mm (0.625”). The pipeline wall thickness was chosen to provide a safe pressure envelope to operate the pipeline within the intended operating range. Allowances for corrosion/erosion based on operating conditions and pipeline life have also been taken into account in selecting the pipeline wall thickness. The pipe wall thickness used in this study is preliminary and will be finalised in the basic design phase.

The recommended external pipeline corrosion coating is factory applied three layer polyethylene.

The pipeline will be buried for security with a minimum 2.0 m depth of cover over top of pipe. The final depth of cover for this project can only be decided in the next phase when frost depth is known.

A design factor of 80% of specified minimum yield stress (SMYS) has been used for allowable stress values of the buried pipeline design in accordance with ASME B31.11, Slurry Transportation Piping Systems. Thicker pipe (lower design factor) will be used in sensitive areas such as river crossings.

Station locations are as follows.

Table 6-1: Station Locations

Facility Location(km)

Location (Rail Mile Post)

Distance between Stations

(km)

Distance between Stations (miles)

Mine Site/PS1 0

PS 2 130 124 130 81

Terminal 330 0 200 124

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6.3 Pump Selection

Positive displacement pumps were selected for this system. Pump data is listed below.

Table 6-2: Pump Data

Station Mine Site/ PS 1 PS 2

Mainline Pump Type Positive Displacement

Mainline Pump Quantity 3 operating +1 stand-by

Flow Rate, m3/h 2257

Pump Station Discharge Pressure, MPa (psi) 8.0 (1160) 8.4 (1220)

Pump Operating Power, kW (HP) 5585 (7490) 5865 (7860)

Although calculated pump discharge pressure is slightly different, all the pumps are identical.

6.4 Pump Station 1 – Mine Site

Refer to Appendix 3 for a conceptual layout of PS 1.

Major components of PS 1 are agitated storage tanks, charge pumps, gland seal pumps, main line PD pumps and test loop.

6.4.1 Agitated Storage Tanks

Studies completed by Ausenco PSI for other projects indicate that agitated storage tanks of equal diameter and height are the most economic when considering capital and operating costs. For this study, four tanks 20 m diameter and 20 m high were selected at the mine site to provide about 8 hours of storage.

Each tank will be designed to contain slurry at a maximum specific gravity of 2.25, which corresponds to 70% solids by weight, in addition to supporting the agitator structure and other loads such as wind and earthquake.

Refer to Table 6-3 for recommended tank dimensions.

Table 6-3: Agitated Slurry Storage Tanks

Number of Tanks Diameter (m)

Height (m) Working Volume (m3)

Pump Station 1 4 20 20 5,500 each

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6.4.2 Slurry Charge Pumps & Gland Seal Pumps

Slurry is pumped from storage tanks to the mainline pumps with two centrifugal, slurry charge pumps (one operating and one standby). The charge pumps are provided with high-pressure gland seal water pumps (one operating and one standby) to prevent ingress of solids into the pump shaft seal. Both charge pumps will be provided with variable frequency drives (VFD).

6.4.3 Mainline Slurry Pumps

The main line pumps are triplex piston-diaphragm type positive displacement pumps operating in parallel (three operating and one standby).

Each pump is equipped with variable speed drive controller, gear reduction, pressure pulsation dampeners, and pressure relief devices.

Pump duty conditions are listed in Table 6-2.

6.4.4 Test Loop

Long distance slurry pipelines are generally provided with a test loop to confirm the hydraulic characteristics of the slurry prior to committing it to the pipeline.

The test loop has the same diameter as the slurry pipeline, and is of sufficient length to obtain reliable pressure drop readings. In the case of the ArcelorMittal iron pipeline, the test loop will be 28” diameter, and will have a length of about 190 m.

The loop will be installed at the mine site pump station between the charge pumps and main line positive displacement pumps. It will be equipped with block valves so that flow from the tanks to the pipeline can be diverted through the loop, or can bypass the loop. Downstream of the loop, flow can be sent to the pipeline or diverted back to the storage tanks.

During commissioning, slurry will be re-circulated back to the storage tanks. During normal operation the test loop can be used in series with the main line (no recirculation to tanks). The instrumentation will give advance warning of increasing pressure drop which could indicate a grind that is too coarse or an increase in slurry concentration.

6.4.5 Flush and Gland Seal Water

It is assumed that the flush water required for the pipeline will be provided by the client from the beneficiation plant. The gland seal water required for the charge pumps will be stored in a 12m x 12m water storage tank.

A volume of 55,000 m3 of flush water is needed at the Head Station in order to displace slurry from PS 1 to PS 2.

6.5 Intermediate Pump Station – PS 2

Refer to Appendix 3 for a concept layout of the intermediate pump station.

Major components of PS 2 will be choke station, agitated storage tank, gland seal water storage tank, charge pump, gland seal pump, main line pumps and water recovery pond.

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A choking system is incorporated to ensure the hydraulic gradient line adequately clears the ground profile and to create additional head dissipation when required. About 20 m choking is required at PS 2.

Main line pumps will be similar to the pumps at PS 1

PS 2 will have one 20 m D x 20 m H agitated storage tank which can be used in case of shutdown or emergencies; however the pipeline will be directly connected to the mainline pumps and therefore will by-pass the tank and charge pump during normal operation. A 12m x 12m water storage tank will supply gland seal water required for the charge pumps.

On the upstream side of the tank a rupture disc is installed to protect the pipeline and piping from over-pressure. The discharge of the rupture disc is directed to the slurry storage tank.

During start up, the pipeline is filled with water. When slurry is introduced at PS 1, the water will be displaced by slurry to the water recovery pond at PS 2. The pond will accommodate the pipeline volume - approximately 55,000 m3 of water.

Water stored in this pond can be used to flush the next pipe section during pipeline shutdown.

6.6 Monitoring Stations

Pressure monitoring stations (PMS) are usually required every 50 km and/or near the points where slack flow is expected. Pressure monitoring stations also facilitate leak detection.

PMSs have been located in between each pump station. A total of five are required: two upstream of PS 2 and three downstream.

6.7 Terminal Station

Refer to Appendix 3 for a concept layout of the terminal station.

Major components of the terminal station will be choke station, agitated storage tanks and water recovery pond

About 200m of chocking is required at the terminal for steady state slurry pumping, but during water batching additional choking may be required. This needs to be optimized during a future phase of the project.

On the upstream side of the terminal a rupture disc is installed to protect the pipeline and piping from over-pressure. The discharge of the rupture disc is directed to the terminal slurry storage tanks.

Tank sizing is listed in the table below.

Table 6-4: Agitated Slurry Storage Tanks

Number of Tanks Diameter (m) Height

(m) Working Volume (m3)

Terminal Station 4 20 20 5,500 each

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The terminal station will also have a water recovery pond to accommodate the pipeline volume between PS 2 and the terminal station - approximately 85,000 m3 of water.

6.8 Pipeline Slope Restrictions

The maximum pipeline slope will be restricted to 12% to minimize risk of a blockage.

6.9 Pipeline Crossings

Road and stream crossings will be trenched. Certain river, larger highways and all railway crossings will be bored. Existing rail bridges will be used if there is enough space to support the pipeline.

6.10 Cathodic Protection

A cathodic protection system is provided to protect any areas of the pipe that may have gaps in the external coating which were not detected during installation. Insulating joints will be provided to electrically isolate the pipeline from pump station and terminal facilities. Bonding bridges will be installed across the station for cathodic protection continuity. Cathodic protection test leads will be spaced at a maximum distance of 1 km along the pipeline. Consideration will be given to the influence of any high tension power lines in the pipeline corridor.

A temporary system using sacrificial anodes may be required to protect the pipeline at all water crossings.

6.11 Leak Detection

Two methods normally are used in pipelines to detect leaks:

Pressure wave detection

Mass balance

6.11.1 Detection by Pressure Valves

Pressure wave detection uses two or more pressure signals to both detect and locate leaks. This works on the principle that any leak in a pipeline will generate a pressure wave that travels upstream and downstream from the leak source. Such waves are detectable using standard instrumentation. Using the time difference between the wave detections, it is possible to detect leak location. Leaks in the range of 3-5 percent of design flow have been detected, and leak locations can be estimated within 1 km. With this method a leak can be detected within minutes.

6.11.2 Detection by Mass Balance

Mass balance uses flow meters and is based on the principle of conservation of mass. Running averages are used to account for short-term flow fluctuations.

The Ausenco PSI software product Pipeline Advisor™ is applicable for leak detection on slurry pipelines.

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6.12 SCADA System

The pipeline will be operated from the mine pump station.

A supervisory control and data acquisition (SCADA) system provides input to the pipeline programmable logic controller (PLC) and provides the operator the information and functions needed to operate the pipeline. Facilities will allow remote (i.e., from the control room) and manual (by a local operator) control of all pipeline equipment. A leak detection system will be included in the SCADA system.

During future phases of work, operating procedures will be developed and converted to program sequences, permitting automated operation of the pipeline system, as well as all other operating functions.

6.13 Telecommunications

A fiber optic telecommunications system using Ethernet technology is provided to support the pipeline control requirements at the pump stations, pressure monitoring stations, and the terminal. While the fiber optic system is primarily installed as the most economic and reliable method to control intermediate and remote stations, it will also be capable of transporting voice, data, video, or other information if required by the project. Based on experience on other projects a 12-fiber cable is recommended. Four fibers would be dedicated for the pipeline control system and eight would be for other possible communication needs including:

Linking mine site processing plant and terminal site DCS systems

Linking mine site processing plant and terminal site PABX systems

Providing communication link to commercial/public system and

Providing internal networks for email, data exchange, file servers, etc.

The above system has adequate capacity to support the SCADA systems for future pipelines.

Based on Ausenco PSI’s experience, an Ethernet technology is recommended as the most cost effective approach for telecommunications. Under this approach Ethernet switches would be located at each of the stations.

A radio system with coverage along the pipeline is also recommended. A radio system provides a communication link between the control room operator and operations/maintenance personnel working between the intermediate stations and can be used as partial voice back-up to the primary fiber optic communications system to support manual operation of the pipeline.

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7 Operating and Control Philosophy

7.1 Start-up

The pipeline is filled with water during commissioning. The pumps and pipeline system are initially operated and checked out on water. After the system operation is confirmed on water, a slurry batch will be introduced at PS 1 and pumped through the system. Water will be displaced from each section of the pipeline into the water pond.

7.2 Normal Operating and Control Philosophy

Mainline pump speed control will be used to adjust flow rate and suction and discharge pressures.

7.2.1 Mine Site Pump Station (PS 1)

At the mine site pump station, the slurry from the thickener underflow enters the tanks at about 65% Cw. The tank agitator maintains the solids in suspension. The slurry tank has low and high level alarms to warn of abnormal tank level conditions.

The slurry charge pump provides suction head from the slurry tank to the mainline slurry pumps.

The main line slurry pump raises the slurry pressure to enable flow through the pipeline. Pump speed is controlled to achieve desired pipeline flow rate. Low suction pressure and high discharge pressure over-rides protect the pump and pipeline, respectively.

7.2.2 Intermediate Station (PS 2)

Slurry from the pipeline will feed directly to the main line PD pumps. During tight-line operation the intermediate pump stations will have suction pressure control with maximum discharge pressure over-ride.

7.2.3 Terminal Station

The pipeline delivers slurry into the slurry tanks at the terminal. The slurry tank has low and high level alarms to warn of abnormal tank level conditions.

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8 Capital Cost Estimate

8.1 Summary

The capital cost estimate has been developed to an accuracy of +/-30% for the defined scope of work.

The capital cost is reported in first quarter (‘1Q’) 2011 United States dollars (‘USD’).

The capital cost estimate assumes that the project will be executed as an engineering, procurement and construction management (EPCM) contract through to the completion of commissioning. Pipeline and station construction contracts will be competitively bid.

The capital cost estimate is summarized by area in Table 8-1.

8.2 Material Costs

The following material cost basis was used:

Positive displacement slurry pumps: Vendor quotation

Line pipe: Vendor quotation

Slurry storage tanks: Based on recent estimate for tank plus agitator

Water storage pond: Not included

Other costs are from recent projects.

8.3 Pipeline Construction

Construction costs were developed using the Ausenco PSI pipeline cost database and using our best judgment to adjust for local conditions. No site visit to Quebec has been made to verify local conditions or costs.

It was assumed that the route is hilly terrain with many lakes and streams following an existing railroad right of way.

10% rock ditch has been included in this estimate.

There are 13 rivers ranging from 40m to 220m in width to be crossed, as well as approximately 25 streams 10m in width. It is anticipated that rivers will be crossed via directional drilling and the small streams by open cut below scour depth and with anti-flotation weights added.

Pipe is assumed to be imported through the port of Port-Cartier, Quebec Canada. The entire pipe will be offloaded into a pipe yard near Port-Cartier. The pipe will then be transported to storage sites near the intermediate pump stations for stringing along the pipeline route.

The “Lay Pipe” crew will line-up the pipe and complete the stringer bead and hot pass on each weld. This crew sets the pace for most of the other crews on the pipeline spread.

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The welding crew will follow the lay pipe crew and complete the fill and cap passes. The fill and cap passes are estimated at 7 welds per welder day.

The weld inspection will be 100% Automatic Ultrasonic (AUT). A specialty subcontractor will supply three crews to cover the mainline.

The external field joints require sand blasting and the application of a liquid epoxy coating.

The lowering-in will be accomplished with side boom tractors, equipped with rolli-cradles. Welders will tie-in any field gaps ahead of the lowering-in.

There will be two tie-in crews. Each tie-in crew will include side booms, hydraulic backhoes, welders, and the equipment and personnel required for the field joints. The AUT costs are already included in the inspect weld operation.

Where the pipeline is constructed in rocky soils, the pipe will be bedded, padded, and backfilled using three crews. Most of the padding material will be placed using an “Ozzie” padding machine. Some material will require hauling from borrow pits. It is assumed that borrow pits can be located within five kilometres of fill sites.

It is assumed that there are 24 hydrostatic test sections containing 5,800 m3 each. Each test section is estimated to require an average of six days to fill and test.

The pipeline contractor will install an HDPE conduit in the ditch before backfilling. After the main line pipe has been tested, separate crews will blow a fibre optic cable into the HDPE conduit and splice the cable. The cable will be installed last so it will not be damaged by any other crews. The crews will also test the cable. It is assumed that the cable will be supplied in six kilometre reels.

The pipeline contractor, or his specialty subcontractor, will supply and install an impressed current cathodic protection system. The estimated cost of the system is $5000 per kilometre for the cross-country pipeline. Cathodic protection for the stations is estimated in the station electrical estimates.

Separate crews will install the river crossings, road and rail crossings as needed, and any other special points.

Indirect costs for the pipeline contractor are estimated based on the schedule, personnel, equipment, and other costs that are required to support the direct construction operations. Indirect costs include home office support, project office, field supervision, field office administration, field engineering, health, safety, environmental, field warehouse, equipment maintenance and service, equipment transportation, camp, catering, mobilization, demobilization, communications, aircraft support, commissioning assistance, personnel rotation expense, insurance, off right-of-way damages, etc.

8.4 Recommendation for Next Project Phase

In the next phase of the project it is recommended that pipeline and station construction costs should be thoroughly investigated. The following items are required:

Working conditions and local costs

Route & site conditions

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Capabilities of local contractors

Availability of international pipeline contractors

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Table 8-1 Total Capital Cost EstimateOption 1: One Pump Station

Iron Concentrate Pipeline: DN 700 (28"); Steel Pipeline with 1 Slurry Pump Station

Area Description Quantity Unit Unit CostUS$

TotalUS$

Storage tank, 18m x 18m, complete including foundation, installed, with agitator, from PSI data base 4 each 1,800,000 7,200,000Water Storage Tank 12m x12m 1 each 300,000 300,000Mainline PD Pump, 2257m3/h, 2391PSI, with VFD, 5 operational; +2 standbyGeho Quote TZPM 2000 ( 3,500,000 Euros) 1.36171 exchange rate 7 each 5,085,987 35,602,000Charge & Gland seal Pumps, 1 operational + 1 standby 4 each 40,000 160,000

Pump station materials and construction. Includes , sump pump, pump shelter, valves, fittings, mechanical, structural, civil, installation, electrical distribution, instrumentation and labor cost, based on 1.5 x PD pump cost 1 lot 53,403,000Pressure monitoring Station 6 each 160,000 960,000Total Cost 97,625,000

Storage tank, 18m x 18m, complete including foundation, installed, with agitator, from PSI data base 4 each 1,800,000 7,200,000Terminal Station @ 10% total 1 each 720,000 720,000Choking 1 lot 500,000 500,000Water Storage Pond, 85,000 m3, w/ concrete liner 1 lot nicTotal Cost 8,420,000

Slurry Pipeline; Bare Steel Pipe w/3LPE coating, DN8-700 (28"), API 5L Gr X70 96,583 t 1,636 158,023,000Cathodic Protection, material and installation for concentrate pipeline 346.5 km 5000 1,733,000SCADA, Leak Detection, Pipeline Monitoring 800,000Fiber Optic Cable, Conduit and Junction Boxes, material only 346.5 km 5,000 1,733,000Slurry Pipeline construction, DN 700 (28"), 20.0 km New ROW 20.0 km 840,000 16,800,000Slurry Pipeline construction, DN 700 (28"), 346.5 km, Existing ROW 326.5 km 840,000 274,260,000Rock Ditch est 10% total distance @ $231m 34.65 km 230,000 7,970,000River Xing's, 13 ea = 1.211 km, 25 minor >10m 1.211 km 10,930,250 10,930,000Highway Xings , 1-4 lane, 2-2 lane Paved, other minor dirt/gravel 60.000 m 500 30,000Total Cost 472,279,000

Total Direct Cost 578,320,000

Indirects Spare Parts 5% Total Station Cost 5,302,000EPCM, 18% of total direct cost plus spares 105,052,000

Contingency, 25% of directs plus indirects 172,169,000Total Pipeline Cost, excluding Owner's costs 860,843,000

Iron Concentrate Pump Station #1

at Mine Site

Terminal Station

Pipeline

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Table 8-1 Total Capital Cost EstimateOption 2: Two Pump Stations

Iron Concentrate Pipeline: DN 700 (28"); Steel Pipeline with 2 Slurry Pump Stations

Area Description Quantity Unit Unit CostUS$

TotalUS$

Storage tank, 18m x 18m, complete including foundation, installed, with agitator, from PSI data base 4 each 1,800,000 7,200,000Water Storage Tank 12m x12m 1 each 300,000 300,000Mainline PD Pump, 2257m3/h, 2391PSI, with VFD, 3 operational; +1 standbyGeho Quote TZPM 2000 ( 3,500,000 Euros) 1.36171 exchange rate 4 each 5,007,859 20,031,000Charge & Gland seal Pumps, 1 operational + 1 standby 4 each 40,000 160,000Pump station materials and construction. Includes , sump pump, pump shelter, valves, fittings, mechanical, structural, civil, installation, electrical distribution, instrumentation and labor cost, based on 1.5x PD pump cost 1 lot 30,448,000 30,448,000Pressure monitoring Station 3 each 160,000 480,000Total Cost 58,619,000

Storage tank, 18m x 18m, complete including foundation, installed, with agitator, from PSI data base 1 each 1,800,000 1,800,000Water Storage Tank 12m x12m 1 each 300,000 300,000Mainline PD Pump, 2257m3/h, 2391PSI, with VFD, 3 operational; +1 standbyGeho Quote TZPM 2000 ( 3,500,000 Euros) 1.36171 exchange rate 4 each 5,007,859 20,031,000Charge & Gland seal Pumps, 1 operational + 1 standby 4 each 40,000 160,000Pump station materials and construction. Includes , sump pump, pump shelter, valves, fittings, mechanical, structural, civil, installation, electrical distribution, instrumentation and labor cost, based on 1.5 x PD pump cost 1 lot 30,448,000 30,448,000Pressure monitoring Station 2 each 160,000 320,000Choking 1 lot 200,000 200,000Water Storage Pond, 55,000 m3, w/ concrete liner 1 lot nicPower Generation, Source Unknown 1 lot nicTotal Cost 53,259,000

Storage tank, 18m x 18m, complete including foundation, installed, with agitator, from PSI data base 4 each 1,800,000 7,200,000Terminal Station @ 10% total 1 each 720,000 720,000Choking 1 lot 500,000 500,000Water Storage Pond, 85,000 m3, w/ concrete liner 1 lot nic

8,420,000

Slurry Pipeline; Bare Steel Pipe w/3LPE coating, DN8-700 (28"), API 5L Gr X70 66,920 t 1,636 109,490,000Cathodic Protection, material and installation for concentrate pipeline 346.5 km 5000 1,733,000SCADA, Leak Detection, Pipeline Monitoring 800,000Fiber Optic Cable, Conduit and Junction Boxes, material only 346.5 km 5,000 1,733,000Slurry Pipeline construction, DN 700 (28"), 20.0 km New ROW 20.0 km 840,000 16,800,000Slurry Pipeline construction, DN 700 (28"), 326.5 km, Existing ROW 326.5 km 840,000 274,260,000Rock Ditch est 10% total distance @ $231m 34.65 km 230,000 7,970,000River Xing's, 13 ea = 1.211 km, 25 minor >10m 1.211 km 10,930,250 10,930,000Road Xing's, 1-4 lane paved, 2 -2 lane paved, as needed dirt/gravel 1.000 ls 30,000 30,000Total Cost 423,746,000

Total Direct Cost 544,044,000

Indirects Spare Parts 5% Total Station Cost 6,015,000EPCM, 18% of total direct cost plus spares 99,011,000

Contingency, 25% of directs plus indirects 162,268,000Total Pipeline Cost, excluding Owner's costs 811,338,000

Iron Concentrate Pump Station #1

at Mine Site

Terminal Station

Iron Concentrate Pump Station #2

Total Cost

Pipeline

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9 Operating Cost Estimate

9.1 Operating Cost Basis

One mechanic and one electrician per shift will be shared between pump stations for maintenance. These mechanics will have a full complement of skills (welding, pipe-fitting, etc.). A total of four shifts will be required to provide coverage 24 hours per day, 365 days per year. The control rooms at both the pump stations will be manned 24 hours per day throughout the year.

One mechanic and electrician will be dedicated for the terminal station. A total of four shifts will be required.

For this study, it was assumed that the pipeline will operate at its design annual throughput to generate an operating cost estimate. The operating cost estimate is summarised Table 9-1. The following were included in estimating costs:

Labour – Based on client data

Supplies/miscellaneous maintenance material for all other equipment.

Contracted Services - includes maintenance of the pipeline right-of-way, piping spools, etc.

Power - estimated according to the operating horsepower for a continuous slurry operation. $0.046/kWh was used for the power cost based on client provided data.

Contingency – a 10% contingency was added to this preliminary operating cost estimate.

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Table 9-1: Operating Cost Estimate

Staff requiredper shift

On-duty shiftsper day

ManpowerTotal

AnnualSalary (1)

AnnualCost (US$)

Pipeline Supervisor (5 d/w x 8 hrs)Note 2 1.0 1.0 1.0 $125,000 $125,000

Lead Operator (7 d/w x 24 hrs) 1.0 4.0 4.0 $125,000 $500,000Operator Assistant (PS 1) Control Room(7 d/w x 24 hrs) 1.0 4.0 4.0 $125,000 $500,000

Engineer (5 d/w x 8 hrs)Note 2 1.0 1.0 1.0 $125,000 $125,000

Maintenance / Electrician (7 d/w x 24 hrs) 1.0 4.0 4.0 $125,000 $500,000

Maintenance / Mechanical (7 d/w x 24 hrs) 1.0 4.0 4.0 $125,000 $500,000

PS 2 Pump Station Operator (7 d/w x 24 hrs) 1.0 4.0 4.0 $125,000 $500,000Terminal Station Maintenance/Electrical (7 d/w x 24 hrs) 1.0 4.0 4.00 $125,000 $500,000

Terminal Station Maintenance/Mechanical (7 d/w x 24 hrs) 1.0 4.0 4.00 $125,000 $500,000

$3,750,000

OperatingkW

AnnualkWh

Power Cost$ / kWh

AnnualCost (US$)

800 6,307,200 $0.046 $290,131

5,590 44,071,560 $0.046 $2,027,292

5,860 46,200,240 $0.046 $2,125,211

800 6,307,200 $0.046 $290,131

500 3,942,000 $0.046 $181,332

13,550 106,828,200$4,914,000

$50,000$100,000

$1,568,000$80,000$20,000$20,000

$10,502,000$1,050,000

$11,552,000

Supplies/Misc. Maintenance Material (spares, safety equipment) allowanceRight of Way Maintenance

Slurry Tank Agitators at Mine site (4)

PS 1 Slurry Pumps (3 Operating, 1 Spare)

(1) Annual salaries figures include total cost of benefits, etc.

Slurry Mainline Pumps Maintenance Material (4% of Pump Cost)

(2) Staff on call 24 hours a day, 7 days a week.

Total Annual Operating CostContingency, 10%

CostsLABOR (1)

Personnel

Subtotal Operating CostOverhead and Administration

Contract ServicesMiscellaneous (travel, fuel, training, security, etc.)

Total Annual Electric Power Cost -SlurryOTHERS

PS 2 Slurry Pump (3 Operating, 1 Spare)

Subtotal Labor Cost

ELECTRIC POWER

Slurry Tank Agitators at Terminal (4)

Subtotal Electric Power -Slurry LineMiscellaneous Loads (Charge Pumps, Gland Seal Pumps etc)

Slurry Pipeline System

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10 Comparison with Commercial Pipeline Operations

Table 10-1 below provides benchmark for worldwide commercial iron concentrate slurry pipelines.

Table 10-1: Iron Concentrate Pipelines

Pipeline LocationThroughputMT/Y

DiameterInch

Lengthkm

Year of Operation

Samarco(2nd Pipeline)

Brazil 8.0 16/14 398 2008

Da Hong Shan China 2.3 9 171 2006

Essar Steel India 7.0 16/14 268 2005

Jian Shan China 2.0 9 105 1997

Samarco Brazil 12.0 20 398 1977

Kudremukh India 7.5 18 71 1980

Savage River Tasmania 2.3 9 85 1967

Photographs of Pump stations, typical pipeline construction, valve station and tanks or similar facilities can be found in Appendix 2.

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11 Project Execution Plan

11.1 Project Implementation

11.1.1 Overview

The project implementation plan is envisioned to be organized around an integrated and dedicated management team for cost effective execution of the project. For this study, it is assumed that the management team will be under the leadership of a Ausenco PSI project manager, responsible for all the phases of work. This model has been successfully applied to other construction projects. The pipeline project manager will report to the overall ArcelorMittal project manager. However, the specialty nature of the pipeline project requires the assignment of specialist personnel to ensure timely, cost-effective completion of the project.

The primary objective of the management team is to implement the project while considering the following:

Minimization of project completion risks

Maximization of project quality standards

Optimization of project quality/cost ratio

Minimization of project cost overrun risks

The project will be divided into seven major phases to provide the necessary controls to efficiently implement and control a project of this nature.

For the proposed project, it is assumed that an integrated Ausenco PSI/ArcelorMittal team will be developed. Ausenco PSI will provide overall management for the pipeline as part of the overall project coordination by ArcelorMittal. ArcelorMittal will provide support services for the pipeline team working under the direction of the Ausenco PSI management team.

11.1.2 Project Phases

The project will consist of seven major phases, each terminating in a well-defined deliverable package, which will be presented for approval before being issued for its intended purpose as outlined below.

Table 12-1: Project Phases

Phase Title Deliverable

I Feasibility Study Optimize conceptual design

II Basic Engineering Final system sizing and specification of significant system components

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Phase Title Deliverable

III Detailed Engineering Detailed design including procurement and construction specifications, drawings, etc. for the project – includes final cost estimate/control budget for the project

IV Engineering follow-up Construction support and final documentationOperating Manual

V Contracting / Procurement Major equipment and Material-Contracts andPipeline construction-Contracts / Materials

VI Construction Completed facility

VII Commissioning Start up and Commissioning reports. Operator training. System capacity confirmation. System in service

Incorporated in the above-mentioned phases is the system design which is part of the engineering that occurs throughout the detailed engineering phase. The system design is interactive, with updates required to incorporate the latest information (vendor certified prints) to provide the basis for the design.

Ausenco PSI estimates that this work (Engineering, Procurement and Construction Management – EPCM) will be approximately 12% to 18% of the project cost

11.2 Schedule

The major phases to complete the pipeline project are listed below with the estimated time required to complete each phase:

Feasibility Study, system optimization (2 to 4 months)

Basic Engineering (5 to 7 months)

Detailed Engineering – includes initiation of procurement (10 to 12 months)

Construction (16 to 20 months)

Commissioning (2 to 3 months)

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Appendix 1 – Process Flow Diagrams

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Appendices

Appendix 2 – Pipeline Facilities Photographs

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Appendices

Appendix 3 – Concept Layouts

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Appendices

Appendix 4 – Vendor Quotations

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Appendices

Appendix 5 – Railway Route Profile – Port Cartier to Mont Wright

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Appendices