Strike Resources is gaining momentum as it looks to become the Pilbara’s newest iron ore producer at its Paulsens East iron ore project, with construction now well underway on the haulage road that will connect the mine to the public road network.
Completion of an 18km haulage road between the Paulsens East project and the public Nanutarra-Munjina Road is the first box to tick on Strike’s final checklist as it hurtles towards first ore from the mine that will be shipped from Port Hedland’s Utah Point.
The company says construction of the haul road is expected to take up to 12 weeks. In the interim, Strike is in contractual negotiations with key suppliers and preferred contractors for mining and truck haulage as it looks to commence mining and create stockpiles of “lump” direct shipping ore in the next four weeks.
Under its recently revised multi-staged feasibility study for the initial 3.5-year project, Strike says stage one will focus on the easily accessible high-grade, low strip ratio surface material that requires minimal capital expenditure and fixed infrastructure.
The company is expecting up to 400,000 tonnes of direct shipping ore, or “DSO” lump and fines product to be hauled in the 2022 calendar year.
The lump product grade that generally attracts a premium price comes in at around 62 per cent iron and the fines grade is expected to return 59 per cent. Metallurgical test work completed by Strike predicts 75 per cent or more of its ore is expected to be the more lucrative lump style.
Interestingly, the company’s revised feasibility study forecasts a net cashflow of about $138 million over the initial 3.5 year mine life and a net present value of roughly $104 million with an internal rate of return coming in at 132 per cent using an iron ore price of US$110 per tonne that is looking a little pale compared to the spot price that has been soaring lately.
At the time of releasing the feasibility study the company postulated that if the market price hit US$135 per tonne, Paulsens East had the potential to generate a whopping $309 million in net cashflows and the internal rate of return would be skyrocketing to 284 per cent.
With iron ore prices clocking in at US$152.50 at the close of trade last week, operating margins are swinging heavily in Strike’s favour. The forecast average C1 cost of production calculated by the company comes in at about US$60 per tonne for the life of mine and a total life of mine breakeven price of roughly US$87 per tonne taking in cost, insurance and freight to China.
Strike is fully funded to fast-track stage 1 development at Paulsens East courtesy of a US$7.2 million loan facility with international iron ore trading company Good Importing International Pty Ltd.
The company says cash flow from stage 1 production will help to fund stage 2 development when annualised ore throughput will be beefed up to 1.5-2 million tonnes per annum.
Under the revised feasibility study, stage 2 mining will focus on the ridge of iron ore underpinning the updated JORC probable ore reserve of 6.2 million tonnes at 59.9 per cent iron.
Importantly, with the rise in fuel prices hitting everyone’s hip pockets, Strike will transition to stage 2 exporting through the Port of Ashburton at Onslow, thereby reducing the haulage distance by nearly 235km.
With construction underway at its Paulsens East iron ore project in the heart of the Pilbara, Strike is in an enviable position having rationalised costs under its revised multi-staged development plan at a time when iron ore prices are surging.
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