Grange Resources approves A$287M Savage River underground development
The sub-level cave is expected to sustain pellet supply through 2035, funded from existing cash reserves and open-pit cash flows.
Mara Quinlan
Grange Resources Limited ASXGRR said on Wednesday it approved its Savage River underground project in Tasmania, with estimated underground capital of A$287 million. The sub-level cave operation is expected to extend iron ore pellet supply through 2035, with funding projected to come entirely from existing cash reserves and open-pit cash flows.
Shares rose A$0.012 to A$0.12 on the ASX at 1:50 p.m. AEDT on Wednesday, according to the ASXGRR quote. Grange mines magnetite and produces iron ore pellets at its Tasmanian operations.
Wednesday's capital estimates also include A$234 million in sustaining expenditure over the project life. Grange reported A$267.9 million in cash, cash equivalents and liquid investments at June 30, so its funding plan also relies on cash generated by continuing operations.
The company targets underground development in the first quarter of 2027 and says all environmental approvals for the development are in place. Management will now proceed to award mining contracts and mobilise while continuing workforce transition planning.
Grange said weaker iron ore prices, rising costs and reduced risk appetite prevented its previously considered block cave development from being funded at the required scale. The smaller sub-level cave requires less initial capital while preserving the option for a later block cave investment.
"It secures our ability to continue supplying high-quality pellets to customers well into the next decade," chief executive Weidong Wang said in Wednesday's release.
Grange's half-year report recorded 1.15 million tonnes of pellet production in the six months to June 30. Pellet sales reached 1.14 million tonnes over the same period, driven by higher production throughput and more spot shipments, the company said.
North Pit is approaching its economic open-pit depth limit of approximately 450 metres, according to the announcement. An existing two-kilometre exploration decline, resource drilling and a bulk sample supported earlier studies of both underground mining methods.
Wednesday's base case estimates an after-tax net present value of A$357 million and an internal rate of return of 43 per cent. The valuation uses an 8.3 per cent real, after-tax discount rate.
The financial assumptions in Wednesday's announcement include a flat benchmark price of US$90 per tonne for iron ore fines containing 62 per cent iron. The model assumes an exchange rate of A$1 to US$0.68, making its returns dependent on the price and currency assumptions as well as execution.
The sub-level cave production target sits wholly within the existing Probable Ore Reserve footprint. Grange says no Inferred Mineral Resources are included in the production schedule, and the approved development leaves a future block cave decision for a later date.
Grange targets the start of underground development in the first quarter of 2027.
