Fenix Resources Ltd (ASX:FEX) has extended existing hedging arrangements for direct shipping ore (DSO) iron ore from the flagship Iron Ridge Mine, a premium deposit in Western Australia’s Mid-West hosting some of the highest-grade iron ore in the state.
The company has extended hedging to ensure cover is in place for a total of 50,000 dry metric tonnes (dmt) of iron ore per month from January 2023 through to June 2023 at a fixed price of A$173.25 per dmt.
New iron ore hedging has been established by iron ore swap arrangements for an additional 15,000 dmt per month over the six-months to June 2023 and extends the existing swap arrangements for 35,000 tonnes per month up to and including June 2023.
The existing hedges were placed in June 2022 and continue to provide strong margin support for Fenix iron ore production and cash flows.
“Strong margin on product”
Fenix chairman John Welborn said: “Hedging has been an important component of Fenix’s success as a highly profitable iron ore producer.
"We are focused on maintaining a strong margin on our high-grade iron ore products throughout the iron ore price cycle.
"Our ongoing hedging arrangements secure a solid margin on a base level of our production and support our ability to continue to generate strong cashflows and profitability.”
Price Protection Policy
Fenix’s iron ore swap arrangements consist of contracts which are cash settled at the end of each month for an amount equivalent to the difference between the fixed price of the contracts and the Monthly Average Platts TSI 62 Index converted to Australian dollars.
These swap arrangements are consistent with the company’s Price Protection Policy designed to support the medium-term profitability of production from the Iron Ridge Iron Ore Mine whilst maintaining positive exposure to iron ore prices.
Fully integrated business
The company operates a unique fully integrated mining and logistics business.
Mining at Iron Ridge is via conventional open pit methods with a low strip ratio and simple crushing and screening of high-grade lump and fines direct shipping ore products.
High-quality iron ore products from Iron Ridge are transported by road to Geraldton using the company’s 100% owned Fenix-Newhaul haulage and logistics business. The company operates its own loading and storage facilities at Geraldton Port.
Fenix’s high-grade iron ore attracts a premium price on the seaborne market. Increasingly, global customers are demanding high-grade ore to meet increasingly strict government regulations.
About Iron Ridge
Production commenced at Iron Ridge in December 2020 and operates at the planned annual production run rate of 1.3 million tonnes.
Fenix has produced and exported more than 2 million tonnes of premium iron ore, generating strong cash flow and profitability since the commencement of production.
The unaudited net operating margin for the first two million dry metric tonnes of iron ore sold from Iron Ridge averaged A$56 per dry metric tonne shipped, representing an unaudited gross cashflow operating margin of more than A$112 million in just 19 months of operation.