Fe Limited (ASX:FEL) has concluded attractive terms for its second shipment from the JWD Iron Ore Project in Western Australia ensuring the company receives the best price possible at a time of volatile iron ore pricing.
Active management of future production and sales scenarios is one aspect of the company’s drive to obtain maximum value from JWD with another being the successful trial of a higher payload Ultra-quad road train.
FEL’s offtake partner has sold the second shipment for delivery to South Asia on a fixed price basis and given the sale is on a fixed price basis the November put option has been closed out.
When combined with realised hedge proceeds, the combined notional sale price from the physical and paper components of this cargo will be circa US$170/dmt on a CFR basis, which compares favourably with the October spot price of US$122.91/dmt and last week’s close of US$94.43.
“Controlling the controllables”
FEL executive chairman Tony Sage said: “Our team continues to do a good job controlling the controllables, with the first shipment successfully discharged and attractive terms concluded on the sale of the second.
“While iron ore and freight prices remain challenging, we have some short-term protection from our hedge program through to December.
“We are carefully monitoring the market and managing our costs to try and determine the best path forward for shareholders beyond that time.”
Plans for second shipment
FEL’s customer has booked the vessel ‘Iolcos Fighter’ for the second shipment, with a current ETA at Geraldton port of November 21.
While freight rates remain elevated, FEL says they are beginning to decline from recent highs.
Positive final product assays
The completed first shipment has delivered positive outcomes for FEL.
Vessel MV Bison successfully completed discharging, with the company receiving final product quality assays.
These confirm the JWD lump product as a high grade, competent material with a final Fe grade of 62.95%, low phosphorus levels of 0.04% and a low ‘fines in lump’ ratio of 6%.
Trial of Ultra-quad road-train
In an effort to improve logistics economics, FEL has successfully trucked a trial parcel of JWD material to Geraldton port using a modern Ultra-quad 60-metre road train.
This higher payload road-train configuration is extensively utilised in the Pilbara and has the potential to reduce truck movements and haulage costs for JWD if the necessary approvals can be achieved and road trains sourced.
Sage said Fe Limited was looking at all means of cost reduction in response to significant reductions in iron ore price and was managing its future production and sales strategy actively to respond to market movements.