Fe Limited (ASX:FEL) is celebrating today after becoming Australia’s newest exporter.
The emerging iron ore producer sent off its maiden high-grade shipment on October 2 from Geraldton Port containing 60,500 wet metric tonnes of lump iron ore product from the JWD Project.
The MV Bison set sail for a leading Southeast Asian mill, where 50,000 dry metric tonnes (dmt) of product is hedged at a 62% iron index price, netting US$160/dmt.
Fe recently sold half of this hedge, realising a US$45.1/dmt gain in the process.
The company’s second lump shipment from the JWD project is currently being hauled and is scheduled to load in November.
The FEL team at Shed 4, Geraldton Port.
“A remarkable achievement”
Fe Limited (ASX:FEL) executive chairman Tony Sage called the maiden shipment “a great milestone” for the company’s team, partners and shareholders.
“We only acquired the JWD asset in September 2020 and just over a year later we have already completed our first shipment, which is a remarkable achievement."
Hedging lump premium
Recently, Fe entered a swap involving 50,000dmt of lump iron ore product, hedging the first shipment’s premium.
Of the four kinds of iron ore product — lump, fines, concentrates and pellets — lump is the only type that can be sent straight through to the blast furnace.
That means the lump cargo can attract a pricing premium over fines iron ore.
Under the swap, Fe exchanged its October floating lump price for a fixed price of US$0.16 per dry metric tonne unit (dmtu).
This unit of measurement is the international standard used to calculate iron ore pricing.
Based on an indicative 63.5% iron grade for the JWD product, it attracts a lump premium of roughly US$10 per dry metric tonne.
In September, the average lump premium was less than half of this at US$0.059/dmtu.
Sage noted: “We are in a very strong position as we have attracted a premium for the JWD ore, as the grade is above 64%”.
Iron ore remains volatile
Fe’s maiden iron ore shipment comes as iron ore prices continue to haemorrhage.
In July, when Fe began hauling lump product from the JWD project, pricing hovered around US$218/dmt.
In recent weeks, however, that price more-than-halved to a US$94/dmt low, although it rebounded to US$117/dmt on October 1.
The damage makes it iron ore’s worst quarter since 2008.
The ASX-lister is working to keep its lump product cost-competitive amid the broader market challenges.
These headwinds include elevated freight costs, which are currently more than double what they were last year when Fe first evaluated the JWD project.
As a result, the company is reducing stock levels at the mine to help manage its cashflow.
It’s also looking to increase efficiencies across its contractor base.
Speaking to the instability, Sage explained: “Iron ore pricing has been extremely volatile in recent weeks, which makes things challenging for a new project like JWD.
“We are pushing on with our next shipment, which also has the headline price hedged at US$160 per dry metric tonne.
“We will continue to work hard with our contractors to take cost out and maximise the sale value of the product to try ensure the project remains viable in the longer term.
“We thank them all for their ongoing support and hard work.”
