BC Iron (OTC:BIRNF) has released an operational update on its 75%-owned Nullagine iron ore operation in Australia. The company has started a number of initiatives which should allow BC Iron to keep a closer eye on the quality of the ore it will be producing. As part of the plan, BC Iron will perform more grade-control drilling on a tighter spacing to make sure it is mining the best quality iron ore, and on top of that, the screens at the crushing and processing plant will be replaced to allow BC Iron to produce coarser iron ore and the lower grade product will be re-screened to remove the very small material.
Additionally, in two new zones (Outcamp 2 and Warrigal 3) the ore is quite "clay-ish" which has a side-effect that it might be very sticky (especially when additional moisture is being added to the product), so at this point in time the company is stockpiling the clay ore to process (or blend) it later in the mine life. A third issue is the fact that partner Fortescue Metals (OTCQX:FSUMF) is shutting down the Christmas Creek rail load out facility for scheduled maintenance.
These factors have resulted in BC Iron taking the decision to ship less ore in the third quarter of calendar year 2014 (Q1 FY 2015) and the total sales for the quarter will be approximately half a million wet metric tonnes less than anticipated (approximately three shiploads). As this is just a shipping delay and not a recurring problem, BC Iron is able to reiterate its full year guidance to produce 5.8-6.2 million wet metric tonnes of iron ore, so the effects of the lower shipments will mainly be felt in the short term.
Disclosure: The author is long BIRNF.
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