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FEX released it quarterly report this morning. Cash costs continue to come down. Now at $78/t down from $84/t (Sept Qtr) which was previously down from $88/t. Hedging extended for 50,000t/m until June 2023. Full results below.
13/12/22 Market Cap $143M
Cash 101.7M
Debt $0.00
Enterprise Value: $41.3m = (143 - 101.7) + 0.00
Dividend yield: 21% (share price 0.25cps)
Next Forecast Ex Div Date: 01/09/2023 (262 days away)
13/12/2022 Iron Ore Price 110.3
C1 - Cost to produce: $88.8wmt shipped, compare FMG $15.91wmt
Mine life: 77 months
Tuesday Fe price: $128.00 -3.38 -2.57% (trending down - China would install a central buyer to combat Australia's pricing power.)
Updated: 21/6/21, Quality grade here 60 plus % grade so we can ask for a decent price.
plus, FEX have hedged the price. from memory $180/Tonne
Iron Ridge hosts some of the highest-grade iron ore in WA
Mineral Resource Estimate1: 9.8Mt @ 64.4% Fe
Ore Reserves1 of 7.1Mt @ 64.1% Fe
The Resource offers a premium 2DSO product & compares favorably to DSO products globally
Approx. 1.5Mt of premium iron ore exported to date • High-grade product averaging 63% Fe (to date) - above the 3benchmark DSO product range
29/8/22 Huge divi at 5.25cps fully franked, Ex- dividend 20/9/22
that is 15.44% yield = 5.25 / 34
which is Grossed up value 20% = 15.44 x 1.43
Company working to deliver C1 FOB Cash Costs below US$60/wmt.
2924-02559740-6A1106489 (markitdigital.com)
shares slide on the announcement: Note iron ore $107.6 per Tonne
Can Craig Mitchell ( Newhaul ) deliver - he is the one receiving the 30Million units and a board positon.
2924-02547810-6A1102285 (markitdigital.com)
RESOLUTION 1 – RATIFICATION OF ISSUE OF SHARES TO NEWHAUL are 30million units x 0.30cps
RESOLUTION 2 – RATIFICATION OF ISSUE OF SHARES TO SCORPION are 4Million units x 0.24cps
Fenix came out with their quarterly activities report this morning and it was a bit of a mixed bag.
In the good column they made six shipments (in line with forecast), cash on hand is over $100m and they started paying tax, which will allow them to generate franking credits.
In the other column cash costs were up more than 10% on the previous quarter, production was down and the net result of all this is that although margins are still ok, they are coming down.
I don't usually look at the miners but there's a few things about this one that are a bit different and hence it stays on my watchlist. It's a relatively simple operation to get your head around, even for a numpty like me. At this stage they have a single open pit mine (with some other nearby tenements they may develop), which produces high-grade iron ore that they sell at a premium rate to China. Although it's high grade it's also high cost, mainly due to the lack of nearby rail infrastructure requiring them to truck the ore to their port in Geraldton. For that purpose they own a trucking operation (they recently bought the remaining 50% of that business) of around 25 trucks.
The market cap is about $150m but as I mentioned they're sitting on $100m of cash so the EV is only $50m. So how can they justify that remaining $50m when you have a falling iron ore price in a high cost operation? They have contracted half of their production capacity at A$230/tonne until the end of September and a third of production capacity from October to June 2023 at A$180/tonne. On my numbers based on just that and continuing to sell uncontracted product at falling prices for the next few months (and then assuming no uncontracted sales), which is a very pessimistic view, that alone gets them pretty close.
Their dividend policy is to pay 50-80% of profit subject to availability of franking credits. The latter bit is a bit tricky to figure out but it's possible they could pay a 20%+ yield this year, fully franked. I doubt you're going to find anything like that outside of coal.
So based on that it almost seems like a no-brainer. Why wouldn't I invest? There are question marks on the Chairman, John Welborn, who is a former Wallaby, and the recent purchase of the remaining 50% of the trucking business did little to put that to bed. They heralded that this would reduce their C1 cash costs by $10/tonne. On that basis you could justify what appeared to the excessive premium they paid, but that was completely disingenuous and ignored the fact they would be up for the significant costs that are not considered C1 and would no longer get the JV profit they previously had (also not included in C1 costs). The level of equity they gave away in the transaction meant the other owner of the JV becomes Fenix's largest shareholder. At least that owner has proven a savy negotiator and they'll benefit from his trucking expertise as he will take up a seat at the board, but they sure paid for it!
[watching]
Fenix Resources Ltd (XASX:FEX) is a niche Iron Ore producer based in Western Australia. Their current project is Iron Ridge, a high-grade Iron Ore mine located approximately 70km north-north west of Cue, WA.
Too lazy to re-write. Thesis is here. Since, the co has put everything inplace to sell ore early CY21 https://www.livewiremarkets.com/wires/strike-while-the-iron-ore-is-hot