Fe Limited (ASX:FEL) continues to build high-grade JWD Iron Ore Project lump product at Geraldton Port in Western Australia ahead of the first shipment which is expected next month as operations continue to ramp up at the mine.
Assays of stock at the port have confirmed a premium grade JWD lump product averaging in excess of 64% iron with very low impurity levels and favourable physical properties.
This comes as the company has started a sales hedging program that provides downside price protection as well as maintaining some upside exposure to high iron ore prices in strong markets.
“Excellent progress”
FEL executive chairman Tony Sage said: “We continue to make excellent progress at JWD, from starting work on the ground in May to being on track to load our first ship in September is a great effort by the team.
“The key attribute which attracted us to JWD was its potential to produce a high-grade lump material, which would be sought after in the market, so it’s very pleasing to see that quality being reflected in the stock that is building at the port in advance of the first shipment.”
Hedging strategy
Sage added: "Iron ore prices have been volatile in recent weeks, so the adoption of a product hedging strategy is wise to smooth this, and it's comforting to know we have attractive pricing locked in on our first three ships while retaining considerable upside participation.”
At the mine development work is complete with all key infrastructure in place including workshop, magazine, production water bores, site access road upgrade, run-of-mine (ROM) skyway, plant and the product yard.
The stage 1 pits are fully established, with mining having progressed through early pioneering and surface contour works.
ROM, Plant and Product Yard at JWD.
Grade control as planned
FEL is encouraged that grade control and ore definition outcomes are as planned with both high-grade lenses now exposed across the pit expression while ROM inventory ahead of the plant is at planned levels.
With crushing and screening operations well underway, the plant is operating at planned throughput rates, generating lump and fines product to the final product stockyard.
This has resulted in sufficient finished product inventory being available at the product yard to support the ramp-up of haulage operations.
Finished product at JWD.
Haulage ramping up
The haulage from mine site to port is ramping up steadily with truck availability and cycle times as planned.
However, manning levels have been below target and this has impacted the overall productivity and tonnage delivered to port.
These issues are primarily due to border closures that have delayed the arrival of east coast-based drivers who had been engaged by the haulage contractor for the JWD ramp up.
Driver recruitment has escalated in recent weeks with a number of new drivers commencing already and further drivers joining prior to month end, both of which will have a positive impact on targeted rates being achieved.
Given these delays in haulage ramp up the first JWD shipment is now expected to occur in September and will comprise high-grade lump product.
Sage said: "The trucking ramp up was always going to be one of the more challenging elements for the project given the tightness in that market, which has been exacerbated by border restrictions, but we are working through that and are starting to see the results flow through.”
Hedging underway
After commencing operations and executing an offtake agreement with global commodities trader Glencore, FEL has sufficient certainty to begin hedging a portion of its production.
The aim of this is to provide downside protection for the iron ore price, while maintaining some upside exposure to high iron ore prices in strong markets, and doing so in a way that minimises the upfront cash cost of entering the hedge.
To achieve this FEL has entered into zero cost collars over 150,000 dry metric tonnes (dmt) for delivery across the December quarter of 2021, representing about three shipments in wet metric tonne equivalent.
These collars have an average floor price of USD153/dmt and an average ceiling price of USD199/dmt with the basis being the 62% iron ore fines price.
The lump premium and grade premium that are expected to be achieved on the JWD lump product will be in addition to the fines equivalent price.
Fe Limited (ASX:FEL) will look to add to this position as market conditions allow.