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By Team Ace Investors
COMPANY OVERVIEW
Grange Resources Limited (“GRR” or the “Company”) is Australia’s most experienced magnetite producer with over 55 years of mining and production from its Savage River mine and has a projected mine life beyond 2035. Grange’s operations consist principally of owning and operating the Savage River integrated iron ore mining and pellet production business located in the north-west region of Tasmania.
The Savage River magnetite iron ore mine is a long-life mining asset. At Port Latta, on the north-west coast of Tasmania, Grange owns a downstream pellet plant and port facility producing over 2.5 million tonnes of premium quality iron ore pellets annually, with plans to increase annual production.
Grange has a combination of spot and contracted sales arrangements in place to deliver its pellets to customers throughout the Asia Pacific region and beyond. In addition, Grange owns a major magnetite development project at Southdown, near Albany in Western Australia. The Southdown magnetite project, once developed, is expected to have the capacity to supply double the amount of iron ore produced at Savage River, at an initial annual production rate of 5 million tonnes of premium magnetite concentrate. The Company is continuing to evaluate options related to a strategic share of the Company’s interest in the project.
Source: Company’s Report
The quarter was marked by several positive developments and innovations which have now been embedded into the business. The team has safely delivered strong operational performance. Iron ore prices have improved over the quarter, although the Company continues to see cost pressures on many fronts. The Company is actively seeking to mitigate these through its planning process for 2024. The average A$ price received during the quarter of A$210.03/t (US$137.82t) (FOB Port Latta), increased by 30.8% from A$160.62/t (US$108.12t) for the June quarter. Grange continued to deliver into secured term offtake agreements, with pellets sales during the quarter of 645kt increased by 30.0% from 496kt for the June quarter.
TECHNICAL CHART
Note – The stock chart pattern is depicting that the stock is in strong upward territory and investors can expect a trend continue from here. Based on Upper Bollinger Band Walk, Volume Surge and Gapped Up, the stock is providing a bullish case.
INVESTMENT RATIONALE:
- The Life-of-Mine-Plan is a key to underpin investment decisions and to optimise business execution. Geotechnical instability has historically introduced uncertainty into the production profile. Over the past few years, the Company has reduced the risk to the production profile with the re-commencement of Centre Pit to provide a second ore source; a substantial ore stockpile; investment in our geotechnical model and controls; and progression of the North Pit Underground feasibility study. The Company will continue to seek to mitigate increasing pressure on OPEX costs; develop contingency for extreme weather events; understand and mitigate risk delays on project development and complete the studies to enable integration and optionality for Open Pit and Underground operation. Centre Pit and stockpiles provide the main source of ore for 2023 and Grange will continue to invest in stripping Centre Pit and North Pit to deliver future high-grade ore.
- Mine Development Projects – North Pit Underground A letter of intent has been provided to PYBAR Mining Services for the provision of underground exploration and continued development of the Exploration Decline. These activities are associated with the ongoing exploration and studies regarding the potential to transition from an open pit to an underground block cave mine in North Pit. This project will serve to deliver more detailed information at depth and particularly around the extraction level for potential future development. The current phase of Definitive Feasibility Study is nearing completion with final documentation and independent peer review in progress. Drafting of the Environment Impact Statement continues, with submission pending.
- Market Overview - Mining magnetite ore is capital intensive and requires significant downstream processing infrastructure including a beneficiation plant, a pellet plant and port facilities. Magnetite products command a value premium above haematite ore products such as fines and lump. This premium is derived on two fronts, through additional iron content, and a quality premium. The growth in Chinese demand and its understanding of the use of magnetite-based iron ore products has seen a significant change in the value accrued to both magnetite concentrate and pellets, and the methodology used for determining that value. As magnetite concentrate is a refined product, it usually has higher iron content and lower impurities. This can have beneficial quality and environmental outcomes for the steel maker.
ACE’s RECOMMENDATION:
The Company owns and operates Australia’s oldest integrated iron ore mining and pellet production business located in the northwest region of Tasmania. The Savage River magnetite iron ore mine, 100km southwest of the city of Burnie, is a long-life mining asset set to continue operation to beyond 2035. At Port Latta, 70kms northwest of Burnie, is Grange’s wholly owned pellet plant and port facility producing more than 2.5 million tonnes of premium quality iron ore pellets annually with plans to increase annual production.Grange holds long term supply contracts for 1 million tonnes of its annual production and offers the balance of its production to market via a spot sales tendering and contracting process. As well as this profitable magnetite operation, Grange has the majority interest in the Southdown magnetite mining project near Albany in Western Australia. Grange is a proven and reliable commercial producer combining both mining and pellet production expertise.Grange has developed capacity and capability. There are new markets developing to address changes in climate. Grange is well positioned to further develop existing assets and consider additional growth that will leverage opportunities in new areas. The Southdown feasibility study will be completed in 2023 and will provide guidance on the go-forward options for development of this world class project. We recommend the stock as BUY at closing price of $0.395.
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