Taking advantage of current iron ore market strength, high grade, high margin iron ore producer Fenix Resources Ltd (ASX:FEX) has secured further iron ore hedging contracts for a total of 150,000 tonnes of iron ore at a fixed price of $163.50 per tonne.
The new contracts are structured as 25,000 tonnes per month for six months from January 2024. They add to Fenix’s current iron ore hedge book of 240,000 tonnes consisting of 60,000 tonnes per month until December 2023 at a fixed price of A$170.10 per tonne.
Well-positioned, high-grade ore
Fenix’s Iron Ridge iron ore mine is a premium direct shipping ore deposit that hosts some of the highest grade iron ore in WA. Production commenced at the mine in December 2020 and is now operating at the production run rate of 1.3 million tonnes per annum.
The company’s iron ore hedging arrangements consist of swap contracts between Fenix and Macquarie Bank which are cash settled at the end of each month. The price is equivalent to the difference between the fixed price of the contracts and the Monthly Average Platts TSI 62 Index converted to Australian dollars.
Fenix says its hedging arrangements are consistent with its price protection policy that’s designed to support the medium-term profitability of production while maintaining positive exposure to iron ore prices.
Iron ore prices have reached five month highs as Beijing shows support for its property sector. Investment bank Barrenjoey iron ore prices were strong as China’s steel consumption remained robust in 2023, and that speculators in futures contracts were betting Beijing’s stimulus measures would equal higher prices in 2024.