Fe Limited (ASX:FEL) has amended a deal with iron ore stock GWR Group (ASX:GWR) Ltd to stagger a series of payments and extend its mining rights into mid-2024.
Through a joint venture with GWR, Fe Limited (ASX:FEL) can secure the right to export up to 1.2 million tonnes from its flagship JWD iron ore deposit up to June 30, 2024.
In exchange, it will make two payments to GWR over November and December, totalling $1.8 million.
FEL can exercise its right to export in two stages: the first, covering 900,000 tonnes of ore, requires a $2.25 million payment before the end of FY24, and the tonnes must be exported by June 30, 2026.
After that, FEL can export a further 900,000 tonnes in exchange for a further $2.7 million, payable before the end of FY26.
The company must ship off this tonnage by the tenth anniversary of its original mining rights agreement with GWR.
Overall, the deal means Fe Limited won’t have to pay $4.25 million by mid-January next year to secure the right to export 2.7 million tonnes of iron ore from the JWD deposit.
It also provides cost and export flexibility as the iron ore spot price remains volatile.
Iron ore’s spot price in USD/tonne is down 55.43% in the last six months. Source: Market Index.
Other terms set out under the mining right agreement remain unchanged, and the 1.2 million tonne export limit includes the iron ore that’s been shipped to date.
Restructure in light of “challenging conditions”
Speaking to the amended agreement, FEL executive chairman Tony Sage said: “We are pleased to be able to secure the ongoing iron ore mining rights at JWD and to reduce the near-term cash cost of doing so.
“We have done the hard work setting up the mine and want to make sure our shareholders get the chance to benefit from that.
“This arrangement achieves that at an affordable cost.
"We appreciate the ongoing assistance from GWR and their pragmatic approach to restructuring the terms in light of the current challenging iron conditions.
“We believe this revised arrangement is to the mutual benefit of the parties and look forward to continuing discussions on unlocking other synergies that may exist between the parties and their neighbouring projects.”