Tasmanian miner Grange Resources is moving forward with execution planning and permitting for its A$891-million underground mine at its Savage River magnetite iron-ore operations south-west of Burnie.  

The underground project would be key to the sustainability of Savage River, said CEO Honglin Zhao on Wednesday.

“We are in a fortunate position of being able to undertake this development while the current opencut operation proceeds,” he said, announcing the outcomes of the definitive feasibility study for an underground mine extending operations by 15 years.

The underground mine will transition North Pit from an opencut mine to underground block cave and sublevel cave mine over the next five years and reduce operating costs by 30%.

The mine will deliver 64-million tonnes of ore and produce 28-million tonnes of concentrate with an iron grade of more than 66% over the next five years. Production will ramp up over the next five years with forecast sales of 2.9-million tonnes of iron-ore products from 2029.

The integration of the underground operation increases Savage River’s ore reserve by 12.5-million tonnes to 109-million tonnes.

The integrated project has a net present value of A$775-million from the generation of A$2.12-billion in cash returns over the next 15 years. The new plan also delivers an internal rate of return of 34%, based on an average product price of about A$177/t.

The capital investment estimate for the underground mine is A$891-million, which Grange plans to fund from existing cash reserves and forecast future cash flows.

“We look forward to the next stage of detailed engineering and preparation to implement a modern block cave to extend the life of the Savage River mine,” said Zhao.

The mine has been in operation for more than 55 years, extracting magnetite from a series of openpits. Grange owns the mine and the downstream processing facilities, which include a concentrator on site and a pelletising plant at Port Latta.