Australian marginal iron ore revival begins
Some of Australia's marginal iron ore mining firms are using hedging and swaps to underpin production, while others wait for further price increases to offset higher costs.
Australian mining firm CuFe has restarted its JWD operations in Western Australia (WA) and begun building a hedge book to cover future sales. It has swapped 10,000 dry metric tonnes (dmt) at $129.50/dmt and entered 20,000dmt of collars with a floor price of $110/dmt and a ceiling price of $129.50/dmt basis 62pc Fe for March.
Fenix Resources has locked in 30,000 dmt/month at a fixed price of A$171.17/dmt ($116/t) for the six months from July to December. This comes on time of the A$173.25/dmt for 50,000 dmt/month for the six months from January to June. "Our hedging arrangements secure a solid margin on a base level of our production and support our ability to continue to generate strong cash flows and profitability," Fenix chariman John Welborn said.
Fenix is the only marginal Australian producer to maintain production through the weaker iron ore period in the second half of 2022, underpinned largely by its hedging strategy. It reported a profit of A$10.9mn for July-December on iron ore sales of 659,000t, of which nearly half was lump and the remainder fines.
CuFe was the last of the smaller mining firms to close its operations in October 2022 and is the first to restart. Others are preparing to follow, with GWR preparing its C3 operations adjacent to CuFe's mine for restart as soon as the pricing environment allows. Strike Resources is pushing forward with its approvals to tranship ore from Ashburton rather than the more distant Port Hedland so that it can capture any further pricing upside. Venture Minerals is also ready to restart in the right price environment, after it won a court case to allow it to truck the ore in northern Tasmania.
Australian mining firm Mount Gibson is not planning a restart to its low-grade Shine operation in the Mid West region of WA, preferring to focus on its higher grade Koolan Island operation. Shree Minerals, which has been renamed Catalina Resources, is still waiting for final approvals for its Nelson Bay River project.
Argus ICX iron ore was last assessed at $126.35/dry metric tonne (dmt) cfr Qingdao on a 62pc Fe basis on 3 March, down from a recent peak of $131.75/dmt on 21 February but up from a recent low of $79/dmt on 31 October 2022.
| Marginal Australian iron ore projects | ||||
| Project | Capacity (mn t) | Fe content (%) | Status | |
| Fenix | Iron Ridge | 1.2 | 64.0 | still operating, hedged |
| CuFe | JWD & C4 | 1.0 | 63.7 | restarted January |
| GWR | C3 | 1.0 | 60.7 | preparing for price rise |
| Nathan River Resources | Roper Bar | 2.0 | 58.5 | unknown |
| NT Bullion | Frances Creek | 2.0 | 59.0 | nothing shipped since June |
| Venture Minerals | Riley | 1.0 | 57.0 | suspended waiting for price hike |
| Mount Gibson | Shine | 1.5 | 59.4 | shut |
| Strike Resources | Paulsens East | 1.5 | 62 lump and 59 fines | suspended, pending port |
| Shree Minerals | Nelson Bay River | 1.4 | 58.0 | awaiting approvals |
| Source: Company reports | ||||
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