Fenix Resources Limited (ASX: FEX) has reached an important milestone with the company having produced and sold three million dry metric tonnes (dmt) of iron ore from its flagship Iron Ridge Iron Ore Project, located in the mid-west region of Western Australia.
The three millionth tonne was shipped from Fenix’s facilities at the Geraldton port, with the cumulative milestones of shipped iron ore production and haulage fully verified.
The unaudited net operating margin for the three million dry metric tonnes of iron ore produced and sold from Iron Ridge has been calculated as approximately A$52 per dmt shipped (unaudited cashflow operating margin before accounting for hedging gains). Chairman John Welborn said that consistent with Fenix’s steady and consistent production rate of 1.3Mtpa, this important milestone was achieved 28 months after the first sale of Iron Ridge product in February 2021.
“Fenix’s consistent profitable production from Iron Ridge is the result of excellent work from our hard-working staff and contractors and our capabilities as a fully integrated mining, logistics and haulage business,” he said.
“We have reduced costs to maintain a strong operating margin which continues to average more than $50 a tonne since first production.
“Our operations at Iron Ridge are maintaining consistent production at a run rate of approximately 1.3Mt of high-quality iron ore products per annum and we are working to deliver C1 FOB Cash Costs below US$60 per tonne. We continue to enjoy strong demand for our products and have a valuable hedge position out to December 2023.
“Strong production and sales performance from Iron Ridge provides the opportunity to advance new growth opportunities that play to our strengths. Fenix is a highly profitable Mid- West iron ore producer with fully integrated logistic capabilities and a strong balance sheet. Our aim is to deliver outstanding returns for shareholders.”
Production milestone trigger
Fenix 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. The Performance Shares 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 specific performance hurdles relating to mineral resources and profitable production milestones (see ASX Announcement dated 7 May 2018).
The achievement of three million dmt of shipped iron ore production from Iron Ridge and the validation that this has been achieved with a net operating margin in excess of US$15 per dry metric tonne (the unaudited margin of ~A$52/t corresponds to ~US$38/t), triggers the conversion of the 30 million Class D Performance Shares to ordinary shares in Fenix.