Grange Resources ((GRR)) is Australia’s largest producer of magnetite iron ore, this through its wholly-owned Savage River mine in north-west Tasmania. Expansion will come via the Southdown mine in Western Australia, where production is expected to commence by 2015.
Shares of iron ore hopeful Grange Resources (GRR) have been placed in a trading halt pending an important announcement and investors are speculating whether the company will announce striking a deal with iron ore major Rio Tinto (RIO). FNArena first reported on these rumours about two weeks ago (see Weekly Analysis The Iron Ore Party Is Still Getting Better (And Better), from July 31).
Grange saw better than expected prices in the Sep Q and lower costs, but sales were weaker and inventory build greater than Macquarie expected, while working capital appears to have increased significantly. The result is a $10m drop in the company’s cash balance.
Grange’s June Q production fell 12% short of the broker’s forecast while shipments were 22% short. The latter reflects GRR’s strategy of holding back inventory when prices are weak. Sales of higher grade ore nevertheless meant cash flow was slightly ahead of expectation.
December quarter production was strong, aided by a recovery in grades and improved pellet premium. Macquarie notes the recovery at Savage River was faster than anticipated and 2014 production expectations have been upgraded.