Concentrate production at the north pit of the Savage River iron ore operation in Tasmania was 632,900 tonnes for the quarter at an annualised rate in excess of 2.5 million tonnes per annum with grade averaging 46%.

The company attributed the performance as a benefit of its strategy to focus on Savage River after relocating its headquarters from Perth to the island state last year.

During the three months to December, total material mined was up 29.7% year-on-year at 4.5 million bank cubic metres, while pellet production increased 24.8% to 619,400 tonnes.

“As we move into 2014, Grange has recovered from the June 2012 wall failure, regained access to the high-grade main zone in the north pit and returned production to planned annualised rates,” Grange managing director Wayne Bould said.

“In addition, we have returned unit operating costs to competitive annualised rates in a sales market which is currently supporting a return of quality product premiums.

“At current operating levels we expect to generate solid cash flows through 2014.”

The company recorded a 6% year-on-year increase in total iron ore product sales in the quarter, with a 14% increase in pellet sales to 565,800 dry tonnes.

Sales were aided by a return of strong interest in high-grade pellet products from Grange’s core Chinese market which supported the return of a more realistic pellet premium resulting in an average sale price of $US149.39 per tonne.

This represents a 14.4% increase over the average realised price in the previous quarter and a 20.6% increase over the average realised price a year ago.

The renewed value apparent in the current pellet premiums has been caused by the Chinese government penalising steel mills producing with higher sulphur dioxide emissions.

Grange says there is a strong sentiment in the market that this situation is likely to prevail in 2014 and that quality iron ore pellet prices are likely to remain similar to current levels through the next year.

The company reported a cash position of $A159.9 million at the end of calendar 2013, compared to cash, term deposits and trade receivables of $188.4 million at the end of the previous year.

Shares in Grange last closed at 23.5c.