Grange Resources Approves Savage River Sub-Level Cave to Extend Mine to 2035
Key Takeaways
- Grange's Board has made a Final Investment Decision on the Savage River Underground Project, choosing a Sub-Level Cave over the larger Block Cave to cut upfront capital.
- The base case delivers an A$357 million after-tax NPV and a 43% IRR on A$287 million of underground capital, with payback in 5.8 years.
- The project is projected to be fully funded from existing cash and open pit cashflows, and stays cash-positive at iron ore prices as low as US$80/t.
- Underground development recommences in Q1 2027, first SLC ore arrives in 2028, and production runs to 2035 with all environmental approvals in place.
- The Block Cave, which would extend mine life to around 2040, remains an unfunded option with no production target or forecast, and is not in these numbers.
Final Investment Decision Delivered for Savage River Underground Project
On 14 October 2026, Grange Resources (ASX: GRR) announced that its Board had made a Final Investment Decision (FID) for the North Pit Underground Project at its Savage River Iron Ore Pellet Operations in northern Tasmania. The Savage River Underground Project will proceed as a Sub-Level Cave (SLC), not the larger Block Cave previously considered.
The SLC requires a significantly lower initial capital outlay than the Block Cave, while preserving optionality to progress to a Block Cave in the future. A Block Cave is a larger-scale underground method, covered in more detail below.
Key highlights from the announcement:
- The project is projected to be fully funded from existing cash reserves and cashflows from the ongoing open pit operations.
- All environmental approvals for the project are in place.
- Underground mining is forecast to commence in Q1 2027.
- The project extends production and pellet supply continuity to 2035.
For you as an investor, the funding point matters most. A project that is projected to be paid for from the company’s own cash and open pit cashflows reduces reliance on outside capital, which the company says was a barrier for the larger Block Cave.
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Base Case Economics: A$357 Million NPV and 43% IRR
The base case rests on a flat price of US$90/t for 62% Fe fines and an average exchange rate of A$1.00 = US$0.68. Net present value (NPV) is the value of future cash flows in today’s dollars, while internal rate of return (IRR) is the annual return the project is expected to generate.
| Parameter | Base case |
|---|---|
| Mine life | ~10 years |
| Project NPV (8.3% real, after tax) | A$357 million |
| Project IRR | 43% |
| Underground capital expenditure | A$287 million |
| Sustaining capital expenditure (over project life) | A$234 million |
| Product price (average $/tonne) | A$181 |
| C1 cash cost (average $/tonne) | A$132 (US$90) |
| All-in cost (average $/tonne) | A$164 (US$112) |
C1 costs are total cash operating costs, including mining, concentrating, pelletising and overheads. The announcement’s Open Cut + SLC summary adds further detail:
- Payback of 5.8 years
- Total revenue of A$4,745M
- EBITDA of A$616M
- Closing cash of A$830M at the end of the Life of Mine Plan (2035)
The forecast excludes any distributions to shareholders the Board may elect to make in the future. Current forecasts keep the bank balance above A$24M through the life of mine, and the SLC has been tested across a range of price scenarios and maintains a positive cash position at prices as low as US$80/t (62% Fe fines).
These financials cover open pit mining over 2027-2028 plus the SLC, and do not include any future Block Cave expansion.
Why a Sub-Level Cave? Understanding the Staged Strategy
Sub-Level Cave versus Block Cave explained
Caving methods mine ore by letting it break and fall under its own weight, then drawing it out from below. Grange describes the SLC as the least-cost option to transition to underground mining, with materially lower upfront capital than the Block Cave.
The investor benefit is the learning. According to the company, the SLC builds underground caving capability and operating data that will reduce the risk of any future Block Cave. Development of the SLC is common to both pathways.
How the decision evolved
Grange has evaluated underground mining beneath North Pit since 2018, as the open pit approaches its economic limit at approximately 450 metres depth.
- 2018: Concept study identified Block Cave and SLC mining as viable alternatives.
- 2019-2021: Prefeasibility Study found both methods technically and economically viable.
- 28 February 2024: Definitive Feasibility Study (DFS) for a large Block Cave released to the market.
- 2026: An Independent Technical Expert review confirmed the project was technically credible.
Even so, the Block Cave could not be funded at the required scale. The company cited lower iron ore prices, sustained cost increases, higher interest rates and slower decarbonisation timelines, which materially reduced risk appetite.
The overall production target is 44.1 Mt, made up of 27.8 Mt of underground ore from Probable Ore Reserves and 16.3 Mt from completing open pit mining. No Inferred Mineral Resources are included, and SLC production runs from 2028 to 2035.
The Block Cave remains the company’s preferred long-term pathway, which would extend mine life to around 2040, subject to funding and market conditions. It remains subject to further studies, funding and a final investment decision, and no production target or financial forecast has been prepared for it.
Weidong Wang, Chief Executive Officer
“The Sub-Level Cave development is a significant step for Grange and for Savage River operations. It secures our ability to continue supplying high-quality pellets to customers well into the next decade…”
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Execution Timeline and Risk Management
Management will now proceed to award mining contracts and mobilise. The announcement sets out these milestones:
| Milestone | Timing |
|---|---|
| Underground mining contract award and mobilisation | Q4 2026 |
| Recommence underground development | Q1 2027 |
| Complete front-end engineering design | H1 2027 |
| Open pit mining complete | 2028 |
| First SLC production ore | 2028 |
| SLC ramp-up to approximately 4 Mtpa | 2030 |
| Future Life of Mine Plan (Block Cave) decision | Subject to funding and market conditions |
Independent validation
The SLC option was independently reviewed in August 2026 by Geoff Dunstan of Caveman Consulting. The review covered the mine design, production schedule and mining cost estimates, and found the design and schedule comprehensive, production rates reasonable and mining cost estimates within expectations.
It did not cover geotechnical conditions or ore recovery modelling. The current SLC risk register contains no extreme risks.
Key risks and controls
- Inrush and mud rush: managed through a Cave Management Plan, including an Inrush Hazard Management Plan.
- Ground conditions: range from fair to very poor in the Bulk Sample Drive, so ground support has been designed on that basis.
- Water inflows: the dewatering system has been designed for flows of up to 1000 L/s, increased from 750 L/s during the DFS.
- Workforce capability: experienced cave mining personnel are scarce, to be addressed through recruitment, experienced contractors, training and specialist mentoring.
The takeaway is a path to 2035 that is projected to be self-funded, with the Block Cave left as an optional upside rather than a requirement.
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