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Fenix Resources locks in pricing for 45% of planned iron ore production in swap arrangements

The ASX-lister’s iron ore swap arrangements fix a sales price over 45% of iron ore production that’s sufficient to cover the majority, if not the entirety, of its budgeted cost base.

Fenix Resources Ltd - Fenix Resources locks in pricing for 45% of planned iron ore production in swap arrangements
Fenix Resources has locked in iron ore pricing for around 45% of its planned production within a 12-month window.

Fenix Resources Ltd (ASX:FEX) has hedged around 45% of its planned iron ore production at $230.30 per dry metric tonne over a 12-month period.

The hedging is covered under iron ore swap arrangements, which stipulate 50,000 tonnes of resource will be priced against the Monthly Average Platts TSI 62 Index and converted to AUD each month from October 2021 to September 2022.

Managing director Rob Brierly said the fixed price was sufficient to cover the majority, if not the entirety, of Fenix’s budgeted cost base.

The swap arrangements were executed after the ASX-lister put a price protection policy in place, designed to secure the medium-term future of its pioneer Iron Ridge Iron Ore Project while maintaining exposure to the iron ore price.

Locking in 45% of planned production

Brierley said: “The iron ore swap arrangements were foreshadowed in our recently released quarterly activities report for the June 2021 period.

“We are effectively locking in around 45% of our planned production during a 12-month period commencing October 2021, at a fixed price that is sufficient to cover the majority, if not the entirety, of our budgeted cost base.

“These contracts will be cash-settled at the end of each month and are unsecured, meaning that there are no margin calls or requirements to lodge cash at call or on deposit.

“We look forward to finalising our capital allocation policy leading up to the release of our FY21 financial results, confident that we have secured profitability until at least 2022’s fourth quarter, by which time the mine plan predicts the production of even higher specification iron ore that should result in higher market premiums”.

The Iron Ridge Project

A Western Australia-based iron ore miner, Fenix is focused on developing its flagship Iron Ridge Iron Ore Project, around 486 kilometres by road from Geraldton Port.

The company’s 100%-owned iron ore asset is a premium DSO deposit that hosts a JORC 2012 compliant resource. Production at the plant kicked off in December 2020, while the first sales were generated in February 2021.

Iron Ridge’s export capacity has been secured through binding agreements with the Mid West Ports Authority, which has authorised Fenix to use its Geraldton Port facilities.

Resource sales from the flagship project are conducted through two primary channels. The first is an offtake agreement with Sinosteel International Holding Company Limited, while the other 50% is conducted via an exclusive marketing agreement with Atlas Iron Pty Ltd.

Through its journey into production, Fenix’s cornerstone project has generated around 160 full-time equivalent jobs, while the company maintains it continues to focus on promoting opportunities for local businesses and the community.

Fenix established a mineral resource and ore reserve for Iron Ridge back in 2019, establishing around 10.5 million tonnes of resource and 7.76 million tonnes of reserve.

Quick facts: Fenix Resources Ltd

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Price: 0.225 AUD

Market Cap: $106.25 m

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Fenix Resources locks in profitability as it hedges 45% of iron ore production

Fenix Resources Ltd's (ASX:FEX) Rob Brierley speaks to Proactive following the news it's hedged around 45% of its planned iron ore production at $230.30 per dry metric tonne over a 12-month period. The hedging is covered under iron ore swap arrangements, which stipulate 50,000 tonnes of resource...

on 22/7/21

3 min read