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- Iron ore up-and-comer Fenix Resources (FEX) has spiked today on the back of two major announcements for its Western Australian iron ore project
- Firstly, Fenix has locked in a binding term sheet with Hong Kong-based Sinosteel International Holding Company for half of the iron ore from its Iron Ridge project
- With Atlas Iron signing up as the marketing agent for half of the mine’s iron ore in August, this means Fenix now sales arrangements for all of the Iron Ridge iron ore
- Secondly, Fenix has locked in the $1 million purchase of iron ore trucking and storage infrastructure in Geraldton from Sinosteel Midwest Corporation (SMC)
- Fenix shares spiked in early action but have since pared their win back to just over seven per cent, currently worth 15 cents each
Fenix Resources (FEX) has spiked today on the back of two major announcements for its Western Australian iron ore project.
This morning, Fenix told shareholders it has landed a binding offtake term sheet with Hong Kong-based Sinosteel International Holding Company. At the same time, Fenix locked in the million-dollar purchase of iron ore trucking and storage infrastructure currently owned by Sinosteel Midwest Corporation (SMC).
Both Sinosteel International and SMC are subsidiaries of Chinese state-owned Sinosteel Corporation.
The offtake deal
Today’s term sheet is for 50 per cent of the estimated iron ore production and sales from Fenix’s flagship Iron Ridge project in WA. The deal spans for the life of the mine but comes with annual review periods.
As far as pricing is concerned, the offtake deal is not fixed; the price of the iron ore will be based on the monthly average of the S&P PLATTS 62-per-cent iron index. However, Fenix said the price will include a premium to reflect the higher iron ore content of the Iron Ridge iron ore.
While the term sheet represents the early stages of the offtake process, Fenix said the companies are now set to ink up a formal sales agreement.
Importantly, with private company Atlas Iron signing up to act as the marketing agent for 50 per cent of Iron Ridge’s iron ore in late-August, this means Fenix has now locked in sales arrangements for 100 per cent of the iron ore from the Iron Ridge mine.
Fenix Managing Director Rob Brierley spoke highly of the company’s new offtake partner.
“We are delighted to have an organisation such as Sinosteel as an offtake party, given its rich knowledge of the iron ore market and strong networks with iron ore users in China: the dominant importer of iron ore and the world’s largest steel producer,” Rob said.
He added that site development at Iron Ridge has already started and the company is still on track for first iron sales in early 2021.
The Geraldton Port infrastructure purchase
Released in tandem with the offtake deal is confirmation of Fenix’s $1 million purchase of SMC’s port facilities at Geraldton Port.
SMC has officially committed to selling its iron ore storage shed and truck unloading and conveyor belt systems to Fenix.
Fenix said it expected the sale to be completed in November this year, at which point it will cough up the $1 million. The purchase can be fully funded by Fenix’s $15 million capital raise launched in August.
“We believe that we have secured a strategic asset that should facilitate the timely development of the Iron Ridge project by gaining access to bulk export facility,” Rob explained.
“We look forward to fostering our strong relationship with Sinosteel further.”
Shares in Fenix spiked almost 18 per cent in early action today, but have since pared their win back to 7.14 per cent, At 1:34 pm AEDT, Fenix shares are trading for 15 cents each.
