Glencore wants ALL of Fe’s iron ore from its JWD mine
There’s something to be said about certainty, which is exactly what Fe has achieved for its JWD iron ore project after reaching an offtake agreement with Glencore.
Under the agreement, the leading international trading house will purchase 100% of JWD’s iron ore lumps and fines over the life of the company’s operations at the mine subject to GWR Group’s existing right to buy up to 50,000t of fines product.
Additionally, Glencore will provide Fe Limited (ASX:FEL) with a US$7.5m ($10.16m) prepayment within five working days of signing to assist with the company’s working capital requirements during the ramp-up phase.
This will be repaid in five instalments of US$1.5m plus interest from the earlier of shipments two to six, or within six months of the prepayment being received.
Sales will be on a free on board basis, which will boost the company’s cashflow due to not having to fund the cost of freight.
“We are pleased to have secured a major company such as Glencore as our offtake partner for JWD,” executive chairman Tony Sage said.
“It is a great vote of confidence in our project and the team, particularly given they have been willing to make a prepayment.
“The prepayment facility will provide us valuable liquidity as we ramp up our operations to full capacity.”
Operations at JWD are ramping up towards full capacity and finished product stocks are accumulating at the Port of Geraldton ahead of the company’s first shipment.
JWD – also known as the Wiluna West JWD deposit – is part of the wider Wiluna West project and is a low capital cost, DSO iron ore development with about 65% of the material presenting as high-value lump ore that typically commands a premium over benchmark iron ore fines.
The company acquired a 51% interest in the project in September last year before securing a three-month option in late May 2021 to increase its equity up to 60% by paying $2.5m in cash or shares, of which $1m has already been paid as a deposit for the option.
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 GWR a $3.50/t fee.
JWD has a resource of 10.7 million tonnes grading 63.7%.
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.