Fenix Resources Ltd (ASX:FEX) has delivered a record quarter, shipping 357,000 tonnes of high-quality iron ore from its Iron Ridge project in Western Australia’s Mid-West.
In addition, the company is in a strong financial position with A$54.9 million in cash as it progresses on its iron ore operations.
Looking ahead, Fenix anticipates a stronger March quarter due to recent rises in iron ore price, reduced freight rates and the high likelihood of quotation period adjustments.
“Accelerate waste stripping”
Fenix managing director Rob Brierley said: “We generated an outstanding production performance, which unfortunately was accompanied by lower iron ore prices and higher ocean freight costs.
“Pricing adjustments from the September 2021 quarter also impacted cashflows.
“However, we have stayed the course with our mine plan and continued to accelerate waste stripping to ensure we have orderly access to high-grade ore sources, with the benefits of this strategy to be yielded in the June 2022 quarter and beyond.
“The current quarter has started positively with higher iron ore prices and lower freight rates, and the high likelihood that pricing adjustments will result in cash inflows.
“We finished the quarter with a strong balance sheet with net cash of $54.9 million, equal to $0.11 a share, and expect to build on this solid position during the second half of the financial year.”
Operational summary
During the December quarter, Fenix loaded six ships with a total of 356,710 tonnes of iron ore from Iron Ridge.
To date, Fenix has shipped 1,198,573 tonnes of product from its Iron Ridge Project.
The average grade shipped for the December quarter was 61.6% iron for fines (previous quarter: 62.2%) and 64.4% Fe for lump product (previous quarter: 64.8%), further displaying the unique high-grade nature of the Iron Ridge deposit.
Financial summary
Cash and receivables as of December 31, 2021, totalled $60.8 million, which consisted of cash of $54.9 million and a receivable of A$5.9 million (US$4.2m) relating to a shipment dispatched in late December 2021 but paid for in early January 2022;
The average price received for ore was US$55.96 (roughly A$77) per dry metric tonne (dmt) free on board (FOB), which is equivalent to US$89.50/dmt (roughly A$123/dmt) cost and freight (CFR).
Received prices were adversely impacted by quotation period price adjustments from the previous quarter that amounted to US$4.6 million or US$13.48/dmt (around A$19/dmt)
Notably, C1 FOB cash costs for the quarter were $94.09/wmt shipped.
In addition, Fenix commenced delivering into hedge contracts from October 2021 at the rate of 50,000 tonnes a month for 12 months and at a fixed price of $230.30/dmt.
Cash settlement under the hedge contracts occurs 10 days after the end of each month, with roughly $8 million received for the two contracts (October and November) settled during the quarter.
Fenix Newhaul haulage joint jenture
The Fenix-Newhaul JV provides bulk haulage transport of the company’s high-grade iron ore products from the Iron Ridge Project near Cue, 486 kilometres to Fenix’s loading facilities at Geraldton Port.
The strategic joint venture approach to the company’s haulage operations represents a significant competitive advantage to Fenix.
During the December quarter, 331,000 tonnes of iron ore were hauled by Fenix Newhaul, closely aligned to budget levels of roughly 110,000 tonnes per month.
Exploration updates
Fenix executed a farm-in and joint venture agreement with Scorpion Minerals Ltd in February 2021 over 33,954 hectares of tenements held by Scorpion adjoining the Company’s Iron Ridge operations.
Fieldwork on the Scorpion farm-in tenements commenced during the December quarter with an extensive heritage survey conducted over areas prospective for iron ore mineralisation.
Several target areas have been identified within close proximity to the company’s existing operations which justify exploration for potential high-grade iron mineralisation similar to Iron Ridge.
All required clearances have now been received over the Scorpion farm-in tenements and the company is reviewing data and conducting ground-truthing prior to finalising a potential first-pass drilling program.
Board changes
During the December quarter, John Welborn was appointed as an independent non-executive director and chairman of Fenix.
Welborn’s appointment followed the resignations of Warwick Davies as interim non-executive chairman and Richard Nicholls-Maltman as a non-executive director.
He has also been appointed as the Fenix representative on the Fenix Newhaul board, effective November 29, 2021.