Fenix Resources Ltd (ASX:FEX) has achieved a 2023 net profit of $29.3 million on the back of 1.36 million wet metric tonnes (wmt) sales of high-quality iron ore from its 100%-owned flagship Iron Ridge Project in Western Australia.
This comprised about 546,000 wmt of lump iron ore boasting an average grade of 64.4% iron and 798,000 wmt of fines with an average grade of 62.7% iron.
Total sales revenue for the year ended June 30, 2023, amounted to $196.8 million, lower than the $249.2 million generated in 2022 as a result of a 14% drop in the average Australian Dollar iron ore price received.
Throughout 2023, Fenix recorded an average iron ore price of US$113 ($167) per dry metric tonne (dmt) compared to the average of US$141 per dmt ($194/dmt) in the previous year.
Mitigating higher costs
During the year, Fenix proactively implemented strategies to mitigate costs and safeguard operating margins while maintaining steady production in the face of volatile iron ore prices.
Despite inflationary pressures on costs in the Western Australian mining industry, the company managed to reduce its controllable operating costs such as the 8% decrease in the C1 free-on-board cash cost to $81.51 per wmt from the $88.83 per wmt in 2022.
This cost-cutting measure was achieved by consolidating the ownership of the Fenix-Newhaul joint venture, which led to savings exceeding $10 per wmt.
Additionally, the company benefited from decreased shipping costs, averaging US$21 per dmt in 2023 ($31/dmt) compared to the previous year’s average of US$32 per dmt ($44/dmt).
Through disciplined cost management and robust operational oversight, Fenix's net C1 operating margin stood at $49 per dmt, excluding hedge and quotation period adjustments.
Strong discipline
“These strong financial results are the result of discipline and operational commitment across the mining, haulage, port and corporate activities of Fenix,” chairman John Welborn said.
“I congratulate the Fenix team and all our hardworking staff, contractors and partners on another excellent performance.
“This is a very exciting period for Fenix and represents the transition of the company from an emerging junior producer to a major mining and logistics business in WA’s Mid-West.”
Cash management
The company's consistent ability to maintain a positive cash flow, with an average operating margin of more than $50 per dmt, reflects its resilience in navigating the volatile iron ore market.
Notably, Fenix's active hedging program proved instrumental in supporting operating margins during the periods of depressed iron ore prices.
With $76.3 million cash on hand as of June 30, 2023, Fenix was able to declare a final dividend of 2.0 cents per share, totalling about $13.9 million, as well as preserve a strong balance sheet to fund future expansion.
“Game-changing transactions”
“During the year, we successfully advanced two game-changing transactions: The acquisition and integration of Fenix-Newhaul and the acquisition of Mount Gibson’s Mid-West iron ore, rail and port assets,” Welborn said.
“These acquisitions provide immediate value for shareholders by supporting our Iron Ridge operations with greater efficiency and lower costs.
“More importantly, Fenix’s expanded asset base and capabilities provide an opportunity to extend and expand our mining production beyond Iron Ridge as well as generate additional future value from the provision of logistics services to a vast array of Mid-West projects based on our high-quality haulage, rail and port capabilities.”