Fenix Resources Ltd (ASX:FEX) has entered iron ore swap arrangements for 35,000 dry metric tonnes (dmt) per month of the Monthly Average Platts TSI 62 Index converted to AUD for the 9-month period from October 2022 to June 2023.
FEX is a high-grade, high-margin iron ore producer working in the prolific Mid-West mining region of Western Australia on its 100%-owned, flagship Iron Ridge Iron Ore Project – a premium DSO deposit that hosts a JORC 2012-compliant resource of 9.8 million tonnes at 64.4% iron, which represents some of the highest grade iron ore in Western Australia.
The company started production in December 2020 following a rapid three-month development period and first sales were generated in February 2021, shipped from the company’s port facility at Geraldton.
Approximately 1.5 million tonnes of premium ore have been exported to date, generating solid cash flow. The price fixed is equivalent to A$180.65 per dmt, flat over the period.
Extending swap arrangements
The new iron ore hedging extends FEX’s existing swap arrangements for 50,000 tonnes per month up to and including September 2022 fixed at a price equivalent to A$230.30 per dmt.
Existing hedges were put in place in July 2021 and have provided strong margin support for Fenix iron ore production and cash flows.
The company’s swap arrangements are consistent with its Price Protection Policy designed to support the medium-term profitability of production from the Iron Ridge project, whilst maintaining positive exposure to iron ore prices.
High-grade iron ore attracts a premium price on the seaborne market, as a purer product results in lower emissions. Chinese steelworks are demanding high-grade ore to meet increasingly strict government regulations.
The iron ore swap arrangements consist of contracts which are cash-settled at the end of each month with no requirement for Fenix to provide margin calls, security or to lodge cash at call or on deposit.
Fenix managing director Rob Brierley said: “Fenix is a highly profitable iron ore producer focused on maintaining a strong margin throughout the iron ore price cycle. Our hedging arrangements are sensible risk management which secure a solid margin on a base level of our production out to June 2023.”