Fenix Resources Ltd (ASX:FEX) has passed a key production milestone with two million dry metric tonnes (dmt) of iron ore produced and sold from the flagship Iron Ridge Iron Ore Project in the Mid-West region of Western Australia.
The fully integrated mining, logistics and haulage business shipped the two-millionth tonne in mid-September from its facilities at Geraldton port, with the cumulative milestone of shipped iron ore production now fully verified.
Fenix’s unaudited net operating margin for the first two million dmt of iron ore produced and sold has been calculated as approximately A$56 per dmt shipped (unaudited cashflow operating margin before accounting for hedging gains.
“Outstanding achievement”
Fenix chairman John Welborn congratulated the entire Fenix team on the significant milestone, which was achieved 19 months after the first sale of Iron Ridge product in February 2021.
“The production and sale of two million tonnes of high-quality iron ore products from Iron Ridge is an outstanding achievement.
"In less than two years Fenix has established a highly profitable business in the Mid-West which has created more than 200 new jobs and generated more than $100 million in cumulative net profits after tax.
“I commend the entire Fenix team of committed staff and contractors who have worked hard to mine, haul, and ship the 2 million tonnes.”
Triggers conversion
Achieving the production milestone has triggered the conversion of Class C performance shares as part of the consideration for Fenix purchasing Iron Ridge.
The company acquired a 100% interest in the high-grade iron ore project in May 2018 for share-based consideration of 25 million ordinary shares plus 112.5 million performance shares.
The company acquired a 100% interest in the high-grade Iron Ridge Iron Ore Project in May 2018 for share-based consideration of 25 million ordinary shares plus 112.5 million performance shares.
These were issued to the project vendors in four classes: 15 million Class A performance shares; 30 million Class B performance shares; 37.5 million Class C performance shares; and 30 million Class D performance shares.
The performance shares vest into ordinary shares upon the achievement of specific performance hurdles relating to mineral resources and profitable production milestones.
Achieving two million dmt of shipped iron ore production and the validation that this has been achieved with a net operating margin in excess of US$15 per dmt (the unaudited margin of ~A$56/tonne corresponds to ~US$41/tonne), triggers the conversion of the Class C shares to ordinary shares in Fenix.
Following the conversion, the only remaining outstanding vendor performance shares are the 30 million Class D Performance Shares which will convert upon achieving a cumulative total of 3 million dmt of shipped iron ore at a net operating margin of greater than US$15 per dmt.
Consistent operations
“Fenix is maintaining consistent operating production at a run rate of approximately 1.3 million tonnes of iron ore per annum and is working to deliver C1 FOB Cash Costs below US$60 per tonne,” Welborn said.
“We have a strong hedge position out to June 2023 and are well placed to continue the company’s excellent production and sales performance and, importantly, deliver outstanding returns for shareholders.”
Fenix continues to advance growth opportunities to build on the existing platform and expand the company’s business and operations.
The company is well placed to progress new opportunities with a strong balance sheet, stabile operations, positive ongoing cashflows and a commitment to deliver value to shareholders.