Strike Resources (ASX:SRK) remains firmly focussed on developing the Paulsens East project in the Pilbara, but high iron ore prices provide opportunity to generate additional valuable cashflow from a mining operation at its Apurimac project in Peru.

Strike’s Apurimac iron ore project is recognised as one of the highest grade, large scale magnetite projects in the world.

It is now expected to be a considerable earner for the company, while it progresses the flagship Paulsens East project towards production.

Since late December over 20,000 tonnes of high-grade direct shipping ore (DSO) has been mined and transported by trucks for local crushing and screening at Apurimac.

Strike is now ramping up operations to increase throughput both via mining operations and the engagement of a second crushing and screening plant to increase crushing capacity to 1,000 tonnes per day.

Once Strike has successfully crushed ~20,000 tonnes of material, it plans to progressively transport the Apurimac Premium Lump DSO product to a stockpile at the Port of Pisco, about 570km away.

All up, the total free on board (FOB) cost of the Apurimac Premium Lump product at the Port of Pisco is expected to be less than US$70 per tonne – that includes mining, crushing and screening, haulage, port and administration costs.

That’s a huge profit margin at current prices.

“The company notes that the benchmark iron ore price continues to remain very strong – currently ~US$168 per tonne,” Strike says.

“Furthermore, the premium attached to lump ore over fines has increased significantly, reaching record highs this month of ~US$0.51 per dry metric tonne unit.

“Based on Fe content of 64% for the Apurimac Premium Lump product, this would imply an uplift of ~ US$33 per tonne of lump ore over the benchmark iron ore price for fines, once the Apurimac Premium Lump product is established in the market.”

The initial target is annual production of ~125,000 tonnes of iron ore from specific areas at Apurimac, but longer term Strike believes it can significantly increase this by targeting production from multiple sites from its concessions there.

Strike has engaged with multiple parties regarding offtake of the Apurimac Premium Lump product from Peru and is in advanced discussions in this regard.

“Strike is confident of securing an off-take agreement shortly,” it says.

“First cashflow from sales expected in the June 2021 quarter.”

 

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.

 

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