FEX today announced to the market two key items:

• Unaudited FY21 NPAT of $49 million, which was a pretty impressive result given they only began shipping of Iron Ore in mid-February; and
• A dividend policy committing to distribute between 50% and 80% of NPAT going forward, franked to the maximum possible levels given their recent start-up.

The CEO Rob Brierley and team should be commended for a highly impressive first half-year of production, especially in light of the recent hedging arrangement which was agreed exactly one week before the Iron Ore price dropped like a lead balloon.

This arrangement has guaranteed that 45% of production for the next 12 months from October 2021 will be sold at USD$165 per ton,  which will cover most or all of the company's production costs over this time.

I do however, have a slight quibble with management committing to such an aggressive dividend policy, which at current levels could easily yield 20% over the next 12 months. I think the market would prefer a new resource or an increase in the current resource size given the relatively short 6-10 year life of mine as things stand, but ultimately I will continue to back the strong leadership that has already been shown.

The recent weakness in the Iron Ore price has caused a roughly 35% sell off that I think is well overblown. The business is still highly profitable at the current lower prices and remains on track for $100m+ NPAT in FY22 with a current market cap of $125m.