Shares in Strike Resources fell 22 per cent following a decision to put iron ore deliveries on hold due to lower commodity prices, despite celebrating its maiden shipment this week.
Strike’s first scheduled shipment of roughly 66,000 tonnes of lump iron ore from Utah point in Port Hedland to China is due in a matter of days, marking a “significant milestone” for the business.
But the future of further shipments in the medium term is unclear, after Strike made the call to pause further shipments from the port on the back of low benchmark iron ore prices and rising input costs, with no explicit indication as to when they might resume.
“Whilst the successful shipment of its first shipment of iron ore from Paulsens East will be a significant milestone for the company, Strike has determined to pause on further shipments from Utah Point given current market conditions,” it said in a statement.
“In particular, taking into account the low benchmark iron ore price relative to prices earlier in the year, together with rising input costs (eg. diesel fuel) adversely impacting operating margins.”
Mining operations at its flagship, the Paulsens East project in the Pilbara, will be wound down over the coming week.
But Strike says it is preparing the asset so it can resume export in the short to medium term should market conditions improve.
Meanwhile, the company is working to secure the Port of Ashburton as a closer export route alternative compared to Utah Point, which it said could help keep a lid on trucking costs.
“The advancement of the Port of Ashburton as an export solution for Strike has the potential to significantly improve the economics at Paulsens East and thus will play an important part in any decision to restart operations at Paulsens East,” it said.
Strike shares closed the day down 22.22 per cent to trade at 10 cents.
