Junior iron ore miner Fe Limited has acted swiftly to respond to a volatile iron ore market reducing its near term payments on the JWD iron ore JV.
Fe had been due for a $4.25 million payment on its 60% share of the JWD iron ore mine near Wiluna to GWR Group in mid-January, which would give it the right to sell 2.7Mt from the next stage of the development.
The company will now pay just $1.8 million in two installments before December 15 for the right to export 1.2Mt, inclusive of tonnes shipped to date, by June 30, 2024.
In a more stable price environment the JV will be able to pay $2.25m by mid-2024 to export a further 900,000t and a further $2.7m by mid-2026 to ship the final 900,000t under the mining rights agreement.
It is the latest move Fe Limited (ASX:FEL) has taken to support the operations in the near term, which sent their first shipment of iron ore to Southeast Asia via the Port of Geraldton on October 2.
That first shipment of 60,500wmt of high grade JWD lump premium was shipped at a 62% index price of US$160/t, well above prevailing spot prices, with a well above index $0.16/dmtu lump premium thanks to a canny hedge put in place by Fe.
Deal secures mining rights for Fe
Fe Limited executive chairman Tony Sage said the restructuring of the payments for the JWD would ensure the company’s shareholders benefit from the hard work done so far to set up the mine.
“We are pleased to be able to secure the ongoing iron ore mining rights at JWD and to reduce the near term cash cost of doing so,” he said.
“We have done the hard work setting up the mine and want to make sure our shareholders get the chance to benefit from that. This arrangement achieves that at an affordable cost.
“We appreciate the ongoing assistance from GWR and their pragmatic approach to restructuring the terms in light of the current challenging iron conditions.
“We believe this revised arrangement is to the mutual benefit of the parties and look forward to continuing discussions on unlocking other synergies that may exist between the parties and their neighbouring projects.”
A number of terms remain in place from the original mining rights agreement. If the JWD JV produces more than 3Mt from the mine down the line, a $3.50 royalty is payable to GWR.
JWD ore sought after by the market
JWD ores are highly sought after by steel mills and draw a premium over benchmark prices because of their lump content.
Lump ores don’t need to be sintered, making the steelmaking process cheaper, cleaner and more energy efficient.
While premiums, like iron ore prices themselves, are down on record highs seen in May this year, securing lump product remains a major focus for big iron ore miners with BHP and Rio Tinto increasingly shifting their export blend to include more of it.
Glencore, the world’s largest commodity trader, came on board as Fe’s offtake partner in July this year, making a US$7.5 million prepayment to back the company’s transition into becoming an iron ore exporter.
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.