GWR Group in iron ore revival as prices rally 20pc in a month

The revival in iron ore prices is beginning to draw juniors who suddenly exited the scene late last year back into action.

GWR Group (ASX:GWR), which scaled back operations at its Wiluna West mine in September, has made its way back in the ring, announcing the resumption of full scale mining at the C4 deposit this morning.

Its shares rose as much as 17.2% or 2.5c to 17c.

The miner, which faces a 700km-odd haulage route from its deposit near Wiluna to the Port of Geraldton, halted mining of fresh ore last year after falling prices and higher freight costs obliterated its margins.

Those conditions have now reversed, with GWR aiming to bring down costs and hedge three shipments between February and July to protect against the threat of more price volatility.

GWR has around 20Mt of iron ore at C4 still to mine, with 2Mt accessible at low strip ratios in the Stage 1 pit remnants and the Stage 2 pit where it is trying to access high grade lump ore which draws a premium from Asian steel makers.

It could add a second vessel each month on interest from Malaysia, Indonesia and China, GWR said.

“It is great to see the flagship C4 Iron Ore mine back in full production, having worked through the recent volatility in iron ore prices, the GWR team has been able to refine its operations focused on cost reduction and fixed priced contract shipments,” GWR chairman Gary Lyons said.

“Due to the nature of our high-grade iron ore, we have been able to take advantage of alternative markets such as Malaysia and Indonesia as well as China.

“There are many moving parts to our operation, and I am very pleased with our ability to tie these in all together as we continue to build our haulage fleet with long term haulage contractors supplemented by additional haulage companies.”

Market turns fast

It is further evidence of the volatility in the iron ore market, which has seen high cost junior iron ore miners open up when times suddenly get good and go dormant when prices dive just as quickly.

C4 was one of a number of mines wound down in the second half of 2021, along with Venture Minerals’ (ASX:VMS) Riley mine in Tasmania, Mt Gibson’s (ASX:MGX) low grade Shine mine in WA’s Mid West and a small number of privately owned operations.

GWR neighbour CuFe Limited (ASX:CUF) and Fenix Resources (ASX:FEX), also in the Mid-West, were able to keep going thanks to important hedging arrangements that helped cover costs, although Fenix still suffered a loss of $26 on each wet metric tonne shipped from its Iron Ridge mine in the December quarter.

But 62% Fe prices have turned around significantly, rising from lows of US$87/t in November last year to US$119/t by the end of 2021 and climbing even further to US$142/t today, having touched US$147.90/t last Friday.

That is 70% up on the 12-month low. Supply issues out of Brazil and Australia and expectations of higher Chinese infrastructure demand have driven the sharp uptick in prices.

The 530 Bench being mined at C4 includes 111,000t of ore averaging 62% Fe, but some of the C4 resource is higher than that and normally attracts a premium to the benchmark price because it can be sold as lump.

Lump doesn’t need to be sintered, meaning it can be processed into steel with less coke and lower carbon emissions.

GWR said a January shipment shared with CuFe left port on January 29, containing 30,428t of GWR’s 64.7% lump on a US$100/t fixed price basis.