Hedging, premium grades shield Strike from iron price volatility
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Hedging and the premium quality of its Apurimac Premium Lump direct shipping iron ore are expected to insulate Strike from price fluctuations such as the recent dive in prices.
The company noted that its maiden cargo of 35,000t of Apurimac Premium lump iron ore has arrived in China with the shipment currently awaiting unloading prior to delivery to steel mill customers.
Importantly, Strike Resources (ASX:SRK) noted that the entire shipment was delivered at a hedged price of US$141.5, or about $195, per dry metric tonne.
Not bad given that iron ore futures sank below the US$90/t mark with at least one commentor forecasting short-term prices as low as US$75/t.
The company also highlighted that the premium commanded its high-grade 66% iron lump product from its Apurimac project, would also provide protection during periods of pricing volatility, noting that 65% Fe Brazilian Fines currently trade at ~US$127/tonne compared with the 62% Fe benchmark fines price of ~US$100/tonn.
Adding further interest, its second shipment of iron ore to a South American steel mill under a trial basis has also been arranged at a fixed price at a premium to the current benchmark price.
“The hedging undertaken by Strike has provided considerable protection to Strike given the recent significant downward movement in iron ore prices. We will continue to monitor iron ore prices and institute further hedging if believed necessary,” managing director William Johnson said.
“The high grade and quality of the Apurimac Premium Lump DSO provides extra margin to partly counter the dramatic decline in iron ore prices.
“Strike looks forward to the dispatch of its second shipment of iron ore from Peru.”
This article was developed in collaboration with Strike Resources, 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.