GWR shares fly +300pc on mining approval for Wiluna West iron ore project

Iron ore company GWR’s (ASX:GWR) share price took off Friday after it secured mining approvals for its Wiluna West direct shipping ore (DSO) project in Western Australia.

DSO refers to minerals that are high grade and require only minimal processing such as crushing before they are exported, which keeps costs low.

The news propelled shares up 313 per cent to an intra-day peak of 31c.

GWR Group (ASX:GWR) share price chart

The approvals cover the C4 deposit at GWR’s iron ore project at Wiluna West, and pave the way for mining to start, and for the construction of a haul road to the Goldfields Highway.

“Current strong iron ore prices provide a unique opportunity for the company and the Wiluna West iron ore project, an exceptional DSO iron ore development project, which will produce a high-grade, low-impurity iron ore,” GWR chairman Gary Lyons said.

The C4 deposit at Wiluna West is 1.4km long and contains a combined DSO hematite Jorc resource of 21.6 million tonnes at 60.7 per cent iron, comprising 18.5 million tonnes at 61.2 per cent in the higher confidence indicated category and 3.1 million tonnes at 58 per cent in the inferred category.

GWR said the start of mining at the C4 deposit would open up the entire 131-million-tonne high-grade deposit at Wiluna West.

The company has held talks with Geraldton port and its current users for port access, and is also investigating shipping opportunities at the port of Esperance.

Iron ore prices at highest for seven years

This week has been a good one for Australian iron ore with spot prices at their highest for seven years and pure iron ore stock Fortescue Metals Group (ASX:FMG) hitting an all-time high of $19.45 a share.

Iron ore shipments landed at ports in northeastern China are currently trading at $US122 per dry metric tonne ($168/dmt) for 62 per cent iron content, according to price reporting agency Metal Bulletin.

The feel-good mood in the market was reinforced by investment bank Macquarie this week.

Macquarie has upgraded its forecast for iron ore prices to $US105 per tonne for the rest of 2020, up 14 per cent, and lifted its 2021 price forecast 27 per cent to $US100/t.

“The upgrades to our iron ore price forecasts have transformed the earnings outlook for the ASX-listed iron ore producers,” Macquarie said.

Higher forecast prices to deliver strong cashflow for iron ore miners

“We now expect FMG (ASX:FMG), BHP (ASX:BHP) and RIO (ASX:RIO) to all be able to deliver strong free cashflow and dividends in FY21 and FY22,” the Australian investment bank added.

Junior iron ore explorers and producers have been sharing in the glory of higher iron ore prices.

Macquarie has based its higher price forecasts for iron ore on ‘sustained strength in Chinese steel demand’ fuelled by the Asian country’s construction, transport and housing sectors which have staged a robust recovery from the COVID-19 pandemic.

Brazil’s iron ore production has been lagging due to virus impact concerns, and unless its supply can catch up, the seaborne iron ore market will be in deficit out to 2022, Macquarie said.

Swiss bank UBS has also increased its price forecasts for iron ore, marking the 2020 price at $US98 per tonne, up from $US91 per tonne earlier, and is expecting 2021 prices to average $US85 per tonne.

Chinese steel production stays strong boosting ore demand

Price reporting agency Metal Bulletin said iron ore prices could stay elevated for the rest of 2020.

“Strong steel production in China continues to support iron ore demand and keep prices elevated, along with the challenges to seaborne supply from Brazil,” it said.

Metal Bulletin added that China had more than made up for the reduction in Brazil’s iron ore supply to the seaborne market by increasing imports from Australia and the rest of the world.