Grange Backs An Underground Expansion At Savage River
Grange Resources has approved a new underground mining operation beneath its Savage River site in northern Tasmania, a project designed to extend pellet production at the decades-old facility through 2035. The company announced the final investment decision for the North Pit Underground Project on Wednesday, with first ore targeted for the first quarter of 2027.
The operation, which has extracted magnetite from open pits in northwest Tasmania since 1967, will transition to underground mining as its current open-pit reserves near depletion. The North Pit Underground Project carries an after-tax net present value of AU$357 million, calculated using a base-case iron ore price of $90 per metric ton for 62% iron fines and discounted at an 8.3% real rate. The company projects an internal rate of return of 43%.
Staged Approach to Underground Development
Grange has been evaluating underground options beneath the North Pit since 2018, examining both sub-level cave and block cave mining methods. The approved project uses a staged approach that commits capital to the underground extension now while preserving the option for a larger block cave expansion beyond 2040. Block cave mining is a large-scale method that uses gravity to extract ore from massive deposits by undercutting sections and allowing material to collapse to collection points below. Such an expansion would require substantially higher upfront investment but could further increase output.
The project's economics hinge on sustained iron ore prices and the company's ability to meet its 2027 timeline. Small shifts in price assumptions or discount rates can produce significant swings in projected value over multi-year horizons. By staging the development, Grange limits immediate capital exposure while retaining flexibility to pursue additional expansions if market conditions remain favorable.
Production and Processing
Magnetite concentrate from Savage River is pumped approximately 85 kilometers via pipeline to a pelletising plant at Port Latta on Tasmania's northwest coast. The facility currently produces over 2 million tonnes of premium iron ore pellets annually, with plans to increase capacity to 2.7 million tonnes. These pellets, spherical balls ranging from 8 to 18 millimeters in diameter with iron content between 62% and 66%, are used in blast furnaces and direct reduction plants for steel production.
The mine's longevity has been tested before. After nearly three decades of continuous operation, Savage River was briefly shuttered in 1996-1997 before resuming under new ownership by Australian Bulk Minerals in late 1997. The current underground expansion represents another phase in the site's evolution as ore grades and mining conditions change.
Market Context
The project unfolds against a backdrop of shifting iron ore market dynamics. Australia is the world's largest iron ore exporter, shipping 923 million tonnes in 2025, with China purchasing approximately 75% of seaborne trade. Iron ore is Australia's single biggest export commodity, generating AUD $117 billion in export earnings in 2025-26 and representing more than 55% of everything Australia sells to China. However, export earnings are forecast to decline to approximately AUD $108 billion in 2026-27 due to softening prices, even as export volumes hold steady.
For Grange, the $90 per ton price assumption underpinning its investment case sits within this context of moderating iron ore markets. The company's decision to proceed reflects confidence that pellet demand will support profitable operations through 2035, but the project's returns remain sensitive to price movements over the next decade.
