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Fe Limited chairman shows faith in near-term iron ore production strategy by early exercise of options

The company has two near-term iron ore production-ready assets at a period of strong iron ore prices and a positive outlook.

Fe Limited - Fe Limited chairman shows faith in near-term iron ore production strategy by early exercise of options
Tony Sage has exercised 5 million options with a total value of $100,000.

Fe Limited executive chairman Tony Sage has demonstrated his confidence in the company’s near-term iron ore production strategy by the early exercising of 5 million options with a total value of $100,000.

These options were exercisable at $0.02 each and were due to expire on May 31, 2021.

Converting the options into shares in an indirect interest means that Sage now holds more than 11.423 million shares in that interest with a further 5.25 million held in a separate indirect interest.

This follows Sage and fellow director FEL Mark Hancock also exercising options last quarter.

Both exercised 2.5 million options at $0.02 each for a total value of $100,000.

“Strong value proposition”

At the time Sage said that buying the shares at this price “is a steal given the company has two near-term iron ore production-ready assets in the current very iron ore high price environment”.

He said the value proposition was also strengthened by the fact that most of FEL’s junior iron ore peers were at least three times the market capitalisation of Fe Ltd of approximately $10.54 million.

Strengthening markets

The company is well-placed to benefit from continuing strong iron ore market fundamentals, including increased demand and higher prices.

China recently outlined its new 15-year plan which further boosts confidence for FEL and the industry as a whole.

This is reflected somewhat by an increase in FEL’s market cap to approximately $21.7 million and an improvement in the share price to $0.042 cents today after hitting $0.05 on December 18, a new high of almost three years.

Near-term production assets

While FEL is well-placed due to the strength of iron ore prices and an encouraging outlook for the near to medium term, the company’s near-production iron ore assets, JWD and Yarram, support the optimism.

Late last month the company completing the transaction to acquire 50% of the Yarram Iron Ore Project in the Northern Territory enabling it to get on the ground in the near-term.

Aggressive exploration work is planned with the intention of beginning production on the project as soon as possible.

Sage said: “We are excited about its potential, so we look forward to conducting further drilling, environmental and stakeholder work in the new year.”

Yarram is one part of FEL’s two-pronged iron ore production strategy with the other being the JWD Iron Ore Project in Western Australia.

JWD works application lodged

FEL last month lodged its Works Approval application for JWD with the WA Department of Water and Environmental Regulation (DWER).

The Works Approval is the only outstanding primary environmental approval required to facilitate the start of works on site.

This approval is expected later this quarter and while waiting, the company is continuing to work on port, transport and offtake agreements.

Workstreams for JWD include:

  • Mine planning including pit optimisations, updated pit designs and mine schedules to produce a premium lump and premium fines product (with updated mine plans demonstrating the ability to produce a more than 62% iron premium product for both the lump and the fines)  and maximise early cashflow;
  • A review of historical metallurgical test-work and steel making properties to be integrated into mine planning, product strategy and marketing;
  • A review of road haulage routes and allowable road train configurations and different port options - which represent more than half of the C1 Cost for JWD and have an influence on capital;
  • Discussions with potential contractors on mining, crushing, and screening, and haulage, with a view to updating cost estimates and formulating a fit-for-purpose, low capex, accelerated execution strategy; and
  • Engaging with potential customers and investigating funding opportunities for the provision of working capital facilities to assist in the ramp-up.

Sage said: “Our experienced team is familiar with what is required to bring this style of project into production.

“We are pushing the projects along as fast as we can as iron ore markets remain very strong, so we are striving to take advantage of the demand that exists for high-quality product such as that envisaged to be produced from these projects.”

Quick facts: Fe Limited

Price: 0.06 AUD

Market: ASX
Market Cap: $33.14 m

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