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Mining
Gold scaled above US$1800/oz overnight, inspiring a rally for ASX large and mid-cap gold miners this morning.
Precious metals producers propped up the materials sector, with Regis Resources (ASX:RRL), up 4.59%, and West African Resources (ASX:WAF), up 4.4%, the standouts.
De Grey Mining (ASX:DEG) and Evolution Mining (ASX:EVN) were both up more than 3% while Newcrest (ASX:NCM) and Northern Star (ASX:NST) were among the better performing large caps.
Grange Resources (ASX:GRR) has arguably enjoyed its best year in more than 50 years of operations at the Savage River magnetite mine in Tasmania.
The company sailed into mid-tier status this year as prices for its iron ore pellets and concentrates sailed to new heights.
While iron ore prices have come down somewhat, premiums offered for products like Grange’s help to maintain healthy margins. Even as prices slid in the September quarter, Grange still added around $100 million to its bank account ($554 million), backing the payment of a 10c a share special dividend next week.
It wants many more good years to come, and thinks it can do so by heading underground at Savage River.
Underground mining for iron ore, a bulk commodity, is pretty uncommon in Australia, but has been done successfully overseas for years.
Case in point the ultra-modern Kiruna mine in Sweden, which resulted in the literal relocation of an entire town to support its expansion.
Savage River will be nothing that drastic, but a PFS released today shows it could add ten years to its mine life by heading underground, supporting a 30% or 120Mt increase in mineral resources.
The mine would produce 6Mtpa of underground magnetite ore a year for more than a decade at a cost of $160 million, producing around 25Mt of magnetite concentrate over its life.
Using sublevel caving and block caving, the kind of underground production method Newcrest employs at its Cadia-Ridgeway gold mine,
Grange anticipates a 20% reduction in C1 cash costs compared to current open put mining costs.
That could be reduced even further in a DFS next year, where Grange will study whether it can fully automate the mine.
Going underground appears to have benefits in terms of reducing the cost and increasing the scale of Savage River, but it is also likely to be less carbon intensive than the open pit, supporting Grange’s bid to become a “green pellet” supplier to the steel industry.
“The magnetite deposit at Savage River continues to deliver high quality ore. This successful prefeasibility study provides us with continued confidence in the long-term future of the Tasmanian operations,” Grange CEO Honglin Zhao said.
“The Study provides justification for our view that the Underground is technically and commercially viable.
“The planned DFS will be completed in parallel with current open pit mining of the deposit and with ongoing resource extension drilling.
“It would also be a consideration of the DFS to complete further value adding studies on automation with the final goal of significantly reducing the C1 operating cost of the mine.”
The big mover in the materials sector today was graphite miner and anode material developer Syrah Resources (ASX:SYR).
The graphite stock announced a “binding” four year offtake agreement with Elon Musk’s Tesla for active anode material from its Vidalia plant in the USA.
The deal, which is a little short on detail right now, is expected to underpin an expansion of the Vidalia plant beyond 10,000tpa with a board decision due in January.
Syrah was up 23% before issuing a pause in trading in its shares.
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