2010 Annual Report - Grange Resources

8 GRANGE RESOURCES LIMITED
Managing Director’s Review (cont.)
Revenue
As has previously been reported the
benchmark system of pricing ceased in
2010. For the past six months (July-
December) Grange has received an interim
price of US$150 per tonne of blast furnace
pellets from both of our major customers,
BlueScope Steel and Shagang. A total of
1.175 million tonnes of pellets were sold at
the interim price during the last six months
of 2010.
With the change to an IODEX index based
pricing system it has taken time for us to
establish a suitable formula with our
customers that can be used long term to
determine individual shipment prices. We
expect to reach agreement on the formula
during the first quarter of 2011, and
adjustments will then be made
retrospectively to all the product sold at
the interim price. We expect the formula to
result in a higher price than $US150/t and
have advised the market that from the
beginning of 2011 we forecast a price in
excess of US$180 per tonne.
Once the pricing formula is agreed, each
shipment will be priced accordingly.
Southdown Project
Grange and its joint venture partner, Sojitz,
have advanced the Southdown project
significantly over the past six months,
culminating in the production of a
pre-feasibility study report in December,
which will undergo review during the first
quarter of 2011.
Highlights of the work undertaken include:
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The State and Federal Governments
provided environmental approval for
the works required to expand the
Albany port facility to accommodate
Cape Sized vessels. This was the
culmination of a five year process
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A large core-drilling program provided
metallurgical samples for determination
of the most appropriate process route.
The resulting process route is
significantly simpler and more
operationally cost effective than
the process route previously being
considered
Increasing the project’s output from
6.8mtpa of concentrate to 10mtpa
of concentrate. This will assist the
economics of the project considerably
as the higher tonnage will use the
same infrastructure (power, pipelines
and port) as the lower tonnage
previously envisaged
The need for additional water capacity
has been recognised, as a result of
the increased output. A desalination
plant is planned to supply the water
from the sea approximately 30km
away from the mine site
Design work with Western Power for
the power line route and infrastructure
is well advanced and “on time”
Re-designing the mine, using in-house
geotechnical experience, to reduce
the overall stripping ratio (and hence
waste removal)
Following the pre-feasibility study review,
it is expected that the Project team will
move into the next stage of the project
– the definitive feasibility study. This will
include a drilling program to enhance the
classification of the mineral resources in
the project and add additional resource
tonnage.
The operations at Savage River provide
Grange with a distinct advantage over its
magnetite peers in that we have the
cashflow, systems and expertise in place
to design and bring the Southdown
project into production quickly, significantly
reducing the execution risk that comes
with large projects.
Grange’s share of the costs of a definitive
feasibility study will be funded from
cashflow.
Investor Relations
The market has continued to increase its
interest in Grange Resources, recognising
that it is Australia’s leading magnetite
producer. The share price has
outperformed the broader ASX indices
and the market capitalisation was
approaching $853 million at the end
of the year. We have also seen greater
institutional investment in the stock.
Market research on the company has
also grown with Macquarie, Merrill Lynch,
Southern Cross and Citibank all initiating
company research in the past six months,
in addition to Petra Capital and Patersons
who were previously covering the stock.
RBS commenced coverage at the
beginning of 2011.
We continue to engage with analysts and
investors and have had site visits to both
the Shagang steel mill in China and to
Savage River during the second half of
2010. These types of visits will continue
in 2011.
Thank you
I would like to extend my thanks to all of
Grange’s employees for their commitment
to improving the safety performance at the
operations, and for putting in place the
plans that will ensure sustainable,
predictable production in the future,
both at Savage River and at Southdown.
To Grange’s customers, thank you for your
ongoing support. The success of your
business is fundamental to us continuing
to deliver a premium product to you.
To our Chairman and Board of Directors,
your guidance, support and availability is
greatly appreciated.
And finally, I would like to thank Grange’s
shareholders for your support during the
year.
Russell Clark
Managing Director
Overview
Review Of Operations
Corporate Governance