Fe Limited (ASX:FEL) has ramped up development activities at JWD iron ore deposit with mining contractor Big Yellow beginning earthworks on-site last week with expectations that this component of the first stage of early works will be completed this week.
The company is working with Big Yellow to finalise the next scope of works to keep the project on schedule in advance of commencement of full mining operations - with mobilisation of the remaining mining fleet planned to occur on the weekend.
A mining rights agreement with GWR Group Ltd (ASX:GWR) has also been renegotiated and extended while FEL has made several appointments to its management team.
“Expediting mining operations”
FEL executive chairman Tony Sage said: “It’s great to see work continuing at JWD and with the iron ore market as strong as ever at present, the timing couldn’t be better.
“In spite of a competitive market for people, we are continuing to attract high-quality mining professionals to our team.
“We are pleased to have been able to agree some common-sense modifications to the JWD mining rights agreements and thank GWR for their assistance in doing so.
“We look forward to creating value for both sets of shareholders.”
GWR chairman Gary Lyons said: “We feel the re-negotiated terms are a positive step for GWR shareholders and will facilitate the expediting of mining operations at JWD”.
Renegotiated mining rights
On September 17, 2020 FEL entered into a binding JV Agreement to acquire a 51% interest in the Mining Rights Agreement held by Gold Valley Iron Ore over the Wiluna West JWD deposit 100% owned by GWR.
Changes to the agreement will extend the Stage 1 timeline and simplify administrative and cashflow requirements.
One of the key changes has been to adjust the methodology by which royalty and rehabilitation obligations are funded - assisting FEL’s working capital during ramp-up.
FEL has also agreed to guarantee its subsidiary company’s obligations to GWR as part of these changes.
In addition, the timeframe by which FEL has to extract the first 300,000 tonnes of ore has been extended from October 2021 to January 2022, providing additional operational flexibility to FEL.
As a consideration for GWR agreeing to the changes, FEL will make a payment of $125,000 in cash, increase the royalty it pays by A$1 per tonne when the headline iron ore price is above US$145 and will grant GWR an option to purchase up to 50,000 tonnes of JWD fines material from the mine gate at estimated cost plus A$10.
ROM ore pad, plant site, production stockpile location - under construction.
Experienced managerial team
Despite competitive market conditions, the company has continued to attract experienced iron ore personnel to join its team with a new registered mine manager in Richard Kerrison and commercial manager Alan Jepson.
Kerrison has more than 25 years of experience in the industry, with a decade of iron ore experience at Rio Tinto and FMG.
He will head the JWD operations team with accountability for delivering safe and efficient production from the site.
Jepson has previously worked with both Cliffs and Atlas Iron and will manage the company’s operational commercial and finance activities.
Alan’s appointment comes on top of projects director Jeremy Sinclair, study manager Eric Kiely and environment and land access manager Stephen Danti.
Combined this is well over 100 years of experience and contacts the company can draw upon.
Iron price and offtakers
The 62% index price has continued to reach record highs and lump premiums remain close to their historical highs, with the strongest demand being for high-grade lump product - such as at JWD.
As a result, the company is receiving several expressions of interest from high-quality offtakers and is currently evaluating these options.