Fenix Resources Ltd (ASX:FEX) has reported a net profit after tax of $10.9 million for the half year ended 31 December 2022 and is well-positioned to outperform in the second half based on significantly improved spot iron ore prices.
The company achieved consistent production performance from its Iron Ridge iron ore mine in Western Australia’s Mid-West, shipping 659,351 wet metric tonnes (wmt) of high-grade iron ore during the first half to generate A$85 million in revenue.
Strong performance despite challenging market conditions
Fenix chairman John Welborn commented on the strong performance of the business during the period: “Fenix has reduced our operating costs in the face of challenging market conditions.
“The company’s disciplined approach to hedging has supported a strong profit result despite lower prevailing iron ore prices last year.
“The acquisition of Fenix-Newhaul is proving to be a game changer, both in terms of reducing costs and providing Fenix a unique advantage in the Mid-West as a fully integrated mining, haulage and logistics company.
“With iron ore prices strengthening, Fenix is well-positioned to outperform in the second half as we focus on advancing our growth aspirations and delivering exceptional value for shareholders.”
Active hedging program
The average Platts 62 Index price during the period was US$101/dmt CFR (prior period: US$136/dmt).
Iron ore prices have improved significantly in early 2023 with recent spot prices above US$130/t.
Fenix has an active hedging program which is designed to manage iron ore price risk and protect the company’s operating margins.
The company extended its hedge book during the period with the addition of swap contracts for 50,000 tonnes per month from January 2023 through to June 2023 at a fixed price of A$173.25 per dmt.
10% reduction in costs
C1 cash costs for the six-month period averaged A$81.25/wmt, representing a reduction of 10% when compared with the prior corresponding period.
The reduction in operating costs was achieved through disciplined cost management and the initial benefits delivered from the integration of 100% ownership of the Fenix-Newhaul haulage business.
Read: Fenix Resources takes ownership in haulage business to 100%; begins leadership transition
This cost performance was critically important in maintaining profitability during a period of depressed iron ore prices.
Half-year results conference call
Fenix will host a live investor briefing on Wednesday 1 March 2023, at 11:00am AWST / 2:00pm AEDT.