Market conditions align to make unlikely project possible

At first blush, Fenix Resources seems to be hearkening back to the boom days of 2012 with its plan to mine an iron ore deposit at Iron Ridge (reports The West Australian).
26th June 2020
Resources Rising Stars

At first blush, Fenix Resources seems to be hearkening back to the boom days of 2012 with its plan to mine an iron ore deposit at Iron Ridge (reports The West Australian).

The single project company has only a small resource 600km north-north-east of Perth and plans trucking its ore a mind-numbing 490km to Geraldton for export.

But on closer examination of the numbers and prevailing market conditions, it seems the stars might just be starting to align for the unlikely project.

The first thing to note about Iron Ridge is its grade. While the resource stands at just 10.5Mt, the grade is a stunning 64.2 per cent.

The ore body is close to the surface and the ore is friable, so it can be mined by a simple open pit operation and processed using mobile crushing and screening facilities. While trucking its ore nearly 500km is expected to mean Iron Ridge operates at a cost of $77/t, diesel costs are down about 35 per cent since Fenix crunched its numbers last year.

To ease costs further, the company has struck a transport joint venture with Newhaul, the newly formed entity of trucking magnate Craig Mitchell.

Another factor working in its favour is an elevated iron ore price above $US100/t.

Fenix calculated last year that Iron Ridge would deliver average annual EBITDA of $16.4m based on an Australian dollar iron ore price of $111.43/t. That contrasts with the prevailing price of about $149/t.

The Rob Brierley-led company estimates it will cost just $12 million to bring Iron Ridge into production. It also believes it can start mining within four months of making a final investment decision, which is expected by the end of next month.

Another factor working in Fenix’s favour is the considerable spare capacity at Geraldton port to accept Iron Ridge’s ore.

Fenix expects to ship 1.25Mt per annum over a 6 1/2-year mine life, and possibly then replicate its model with another small ore body.

The next major steps for Fenix are securing its mining approval and locking in an offtake and financing deal.

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