Fenix Resources Ltd (ASX:FEX) has taken further advantage of the current strength in iron ore markets to boost its hedge book by a further 90,000 tonnes of iron ore from the Iron Ridge operations in Western Australia.
Additional iron ore hedging contracts for a total of 90,000 tonnes of iron ore have been added, structured as 15,000 tonnes per month from January 2024 through to June 2024.
These new contracts add to Fenix’s existing iron ore hedge book which now comprises a total of 420,000 tonnes, structured as 60,000 tonnes per month until December 2023 at a fixed price of A$170.10 per tonne and 50,000 tonnes per month from January to June 2024 at a fixed price of A$170.25 per tonne.
Strong positive margin
The improved hedge book now represents slightly less than 50% of planned production from the 100%-owned Iron Ridge Iron Ore Mine which secures a strong positive cashflow margin on a base level of production whilst maintaining positive exposure to spot iron ore prices.
This additional hedging is consistent with the company’s Price Protection Policy designed to support the strong cashflow generation and profitability Fenix generates from ongoing steady production volumes from Iron Ridge.
The company’s hedging arrangements consist of swap contracts between Fenix and Macquarie Bank Ltd which are cash-settled at the end of each month.
This is 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.