Grange chooses the cheaper path beneath Savage River

Grange selects a lower-capital underground path

Grange Resources Limited (ASX:GRR) has committed to develop the North Pit Underground Project at its Savage River iron ore and pellet operations in Tasmania, choosing a Sub-Level Cave design after the larger Block Cave concept became harder to fund. The approved underground capital requirement is approximately A$287 million, with the company projecting that the development can be funded from existing cash reserves and cashflow from ongoing open-pit operations.

The decision gives Grange a defined transition beyond the economic limit of the North Pit open cut, which is approaching a depth of about 450 metres. Open-pit mining is scheduled to continue for roughly two years, with underground development targeted to begin in the first quarter of 2027 and first Sub-Level Cave production expected in 2028.

Base case points to A$357 million NPV

For the integrated open-pit and Sub-Level Cave plan, Grange forecasts 44.1 million tonnes of ore production, 24.3 million tonnes of pellets and 1.21 million tonnes of chips. At a flat iron ore price of US$90 a tonne for 62% Fe fines and an exchange rate of A$1.00 to US$0.68, the company estimates an after-tax NPV of A$357 million, an IRR of 43% and a payback period of 5.8 years.

The financial case assumes an average product price of A$181 a tonne and average C1 cash costs of A$132 a tonne over the project life. Grange says the plan maintains a positive cash position at prices as low as US$80 a tonne, although the stated economics remain sensitive to iron ore prices, exchange rates, operating costs, production performance and the timing of the underground ramp-up.

Funding setback reshaped the Savage River plan

The Sub-Level Cave approval follows years of work on a larger underground operation. Grange had previously advanced the Block Cave concept through feasibility studies, drilling, an exploration decline and bulk sampling, but the company says weaker iron ore prices, sustained cost increases, higher interest rates and slower decarbonisation timelines reduced funding appetite. The company’s major shareholder also indicated it would not provide financial support at this stage, a setback covered in the North Pit funding setback.

Rather than abandon the underground strategy, Grange has opted for a staged approach. The Sub-Level Cave is intended to operate independently to 2035, while also completing development that would be useful under a future Block Cave pathway. Any larger mine remains subject to further studies, funding, market conditions and a separate final investment decision; the announcement provides no Block Cave production target or financial forecast.

Ore reserve supports an eight-year underground target

The Sub-Level Cave production target comprises 27.8 million tonnes of underground ore between 2028 and 2035, with a head grade of 57.8% Davis Tube Recovery. The underground portion is sourced entirely from Probable Ore Reserves, while the overall 44.1 million tonne target also includes 16.3 million tonnes from the final stages of North Pit and Centre Pit open-pit mining. No Inferred Mineral Resources are included.

Grange reports a North Pit underground Ore Reserve of 60.6 million tonnes at 45.9% Davis Tube Recovery, all classified as Probable. That classification reflects the uncertainty associated with ore mixing and dilution in caving operations. The company says material remains below and around the initial Sub-Level Cave for a possible later Block Cave or alternative underground development.

Execution now moves from study to mobilisation

The immediate test is delivery. Grange plans to award the underground mining contract and mobilise in the fourth quarter of 2026, recommence lateral and vertical development in early 2027, complete front-end engineering design in the first half of 2027 and ramp underground production towards approximately 4 million tonnes a year by 2030.

The company has environmental approvals in place, but the project still carries operational exposure to ground conditions, water inflows, cave management, ore recovery, workforce availability and haulage capacity. The independent August 2026 review found the Sub-Level Cave design, schedule and mining cost estimates were at an appropriate level, but it did not cover geotechnical conditions or ore recovery modelling. Those are the areas that could give the headline economics their next serious test.