Fenix Resources Ltd (ASX:FEX) is positioning itself as a fully integrated mining, haulage and logistics company thanks to its latest acquisition.
The iron ore stock has inked definitive agreements with business management consultant Newhaul to pick up the remaining interest in a haulage joint venture operation.
By acquiring Newhaul’s 50% stake, Fenix believes it can lower operating costs while delivering higher earnings and dividends for shareholders.
To complete the buy, Fenix will hand over $7.5 million in cash and 30 million ordinary shares. There’s also a 60 million contingent share consideration if the company hits some performance milestones.
Moving ahead, Newhaul founder Craig Mitchell will join the Fenix board as non-executive director and will become the iron ore stock’s largest shareholder.
Shareholders can learn more about the acquisition and how it positions the company in an investor briefing at 12:00 pm AEST today.
Building resilience against price volatility
Fenix managing director Rob Brierly said buying the remaining interest in the Mid-West haulage business was a strategic move, because it immediately reduced the company’s haulage costs — the largest expense for Mid-West iron ore miners.
Commenting on the acquisition, Fenix chair John Welborn said: “Fenix-Newhaul is a highly profitable state-of-the-art logistics business that is an essential component of Fenix’s business success.
“Consolidating 100% ownership is a smart move which will reduce our costs and provide operational flexibility.
“These advantages will make our business significantly more resilient and robust to commodity price volatility.
“The transaction is a key outcome from the board’s recent strategic review and provides Fenix with a vastly improved platform to evaluate and acquire further growth opportunities.”
About Fenix-Newhaul
Fenix-Newhaul was incorporated in October 2020 as a 50:50 joint venture company to implement the strategic alliance between Fenix and Newhaul.
The JV was established to provide haulage and logistics services to Fenix’s Iron Ridge Project in the Mid-West region of Western Australia, 490 kilometres from Geraldton Port.
Nowadays, Fenix-Newhaul operates a state-of-the-art fleet of 25 quad road trains which provide a daily haulage capacity to Fenix of up to 4,000 tonnes.
In the last 18 months, the business has hauled more than 1.8 million wet metric tonnes of material — equivalent to around 1.72 million dry metric tonnes — of high-grade iron ore to Geraldton, completing more than 15,000 round trips across nearly 15 million kilometres.
Further, the Fenix-Newhaul business provides additional logistics support to Fenix’s operating iron ore loading facilities at Iron Ridge.
The business includes a driver change-over facility and a driver accommodation base at Cue, as well as a company-owned 110,000-square-metre depot in Geraldton with 24-hour workshop and administration support.
New expertise on board
In tandem with the acquisition, Newhaul founder Craig Mitchell is poised to become a pivotal part of the Fenix board.
Mitchell founded the eponymous Mitchell Corp in 1997, which became one of Australia’s largest bulk haulage businesses.
The brand operated in four states and serviced some of Australia’s largest energy and mining companies before its sale to Toll Group in 2011.
Now, speaking to his expected appointment to the Fenix board, Mitchell stated: “In collaboration with Fenix, Newhaul has established a highly efficient haulage solution to connect Fenix’s Iron Ridge mine in the Mid-West, to the company’s port operations in Geraldton.
“This has been achieved by combining a modern, intelligent haulage fleet with a skilled and dedicated workforce, and strong systems and processes.
“The entire Fenix-Newhaul team is excited to join with Fenix and contribute to building an even stronger and more scalable logistics business.
“We remain committed to supporting Fenix’s business and are particularly excited by their expansion plans in the Mid-West region.”
Fenix chair John Welborn went on to say that Mitchell was “a highly experienced and impeccably credentialed business leader” with an enviable track record.
“[Mitchell] has supported Fenix from inception both as the founder of our haulage joint venture as well as a shareholder,” Welborn explained.
“I would be delighted to have Craig join the Fenix board and look forward to working with him and the entire team in driving the next phase of growth at Fenix.”