ASX-listed Strike Resources has poured $5 million into its treasury via a “significantly oversubscribed” capital raise, with funds to be used for the ramp-up of production at its Apurimac iron ore mine in Peru and advancing the Paulsens East iron ore project development in WA.
The Perth-based company, which has tapped the equity market as iron ore prices bubble away near-record highs above US$200 per tonne, says it will issue about 22.8 million new Strike shares to a strong cast of sophisticated investors. Canaccord Genuity was lead manager of the share placement.
Strike’s issued capital structure will expand to a total of about 270 million shares once the new stock hits its register, which is scheduled to take place next week.
The company is looking to double Apurimac’s direct shipping iron ore sales from 125,000 tonnes per annum to 250,000 tonnes per annum.
It says the planned expansion requires further investment in mine infrastructure, mining operations across multiple sites and possibly the acquisition of a dedicated crushing plant to speed up processing and reduce operating costs.
According to Strike, more than 30,000 tonnes of high-grade premium lump iron ore has now been mined at Apurimac and is currently being crushed at a couple of local crushing plants close to the project.
Given the proposed increase in production, the company has also started crushing ore at a third, higher-capacity plant nearer the Pisco port.
With the three third-party crushing plants on the go, Strike hopes to export a maiden shipment of about 30,000-35,000 tonnes of premium Apurimac lump iron ore going a cracking targeted grade of about 65 per cent iron in July this year.
The $60 million market-capped iron ore producer – with the valuation not including the latest capital raise shares – has estimated FOB costs at about US$70-80 per tonne.
In conjunction with securing a transport fleet of 50-to-80 trucks to haul anticipated greater volumes of mined ore and crushed product, Strike says it has recently appointed a shipping agent in Peru ahead of the planned first iron ore shipment.
Strike has also been making steady progress at its Paulsens East iron ore project 140km west of Tom Price in the Pilbara region.
A final investment decision on the proposed development, which has an impressively low pre-production capital cost of only $15.7 million, has been slated for the September quarter this year.
Financial metrics in the company’s feasibility study tabled in the December quarter last year projected free cash flows before tax of just under $70 million a year over an initial four-year mine life for Paulsens East, based on a benchmark iron price of US$115 per tonne.
High-grade direct shipping ore production has been forecast at 1.5 million tonnes per annum, with product to be trucked to Port Hedland for export.
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