Fe closes in on first JWD iron ore shipment
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Fe Limited continues to build up stocks of iron ore ahead of the first export shipment while operations ramp up at its JWD project.
Assays of port stocks have confirmed the premium quality of JWD ore with average grades exceeding 64% iron. Sales hedging with an average floor price of US$153 ($208) per dry metric ton and an average ceiling price of US$199/dmt based on the 62% iron ore fines price has started.
These zero cost hedges over 150,000dmt for delivery across the fourth quarter of 2021, or about three shipments, are expected to provide downside price protection with the company noting that it expects to receive the lump and grade premiums for JWD ore.
Fe Limited (ASX:FEL) noted that mine development work at JWD is now complete with all key infrastructure in place including workshop, magazine, production water bores, site access road upgrade, run-of-mine (ROM) skyway, plant and the product yard.
It added the Stage 1 pits are fully established, with mining having now progressed through early pioneering and surface contour works.
Grade control and ore definition outcomes are also as planned with both high grade lenses now exposed across the pit expression.
However, it noted that while port haulage has been ramping up steadily, manning levels have been below target due to border closures that have delayed the arrival of east coast based drivers engaged by the haulage contractor.
As a result, the first shipment of JWD ore is now expected in September rather than the second half of August.
“We continue to make excellent progress at JWD. From starting work on the ground in May, to being on track to load our first ship in September is a great effort by the team,” executive chairman Tony Sage said.
“The trucking ramp up was always going to be one of the more challenging elements for the project given the tightness in that market, which has been exacerbated by border restrictions, but we are working through that and are starting to see the results flow through.”
He added the company was pleased that the key attraction of JWD – its ability to produce high-grade lump material – was reflected in the stock that is building at port.
Sage also noted that with iron ore prices becoming volatile in recent weeks, it was comforting to lock down attractive pricing on the company’s first three shipments.
Fe initially acquired an interest in the JWD project – also known as the Wiluna West JWD deposit – in September last year and subsequently exercised a three-month option that it secured in late May 2021, increasing its stake in the project up to 60%. The project met the company’s investment thesis due to its potential to produce high-grade direct shipping iron ore that is expected to deliver a premium over benchmark iron ore fines.
First stage development consists of a test pit from which Fe has the right to extract up to 300,000t of ore.
From here, the company has the option to pay $4.25m to move to the second stage, which allows a further 2.7Mt of ore to be extracted.
It can also opt to mine any remaining economically recoverable ore from the project under the third stage by paying the vendor GWR Group (ASX:GWR) a $3.50/t fee.
JWD has a resource of 10.7 million tonnes grading 63.7% iron.
This article was developed in collaboration with Fe Limited, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.