Fenix Resources Secures Transformational Right-to-Mine Deal at Weld Range Iron Ore Project
Fenix Resources (ASX: FEX) has announced a “game-changing” right-to-mine agreement with the world’s largest steel producer over the Mt Weld Range hematite iron ore project in Western Australia, signing a 30-year deal with Sinosteel Midwest that could markedly extend the project’s current mine life and expand production.
The deal extends the run of good news Fenix has recently enjoyed, with the company commissioning its third iron ore operation at the Beebyn-W11 mine in June and also achieving its targeted production run rate for the year of 4 million tonnes.
The new agreement should give the Fenix team a solid opportunity to increase efficiencies and profit margins, materially expand output, and generate strong rewards for the company’s partners and shareholders.
Cash Consideration
Under the terms of the agreement, Fenix will pay Sinosteel – a subsidiary of China Baowu Steel – a consideration of $60 million split into three equal instalments over the next two years.
It will issue a fixed royalty of $4 per dry metric tonne of Weld Range ore shipped per quarter within 24 months of the start of commercial production, after which the royalty will remain at $4/t for an annual production rate of more than 8Mt and increase to $5/t if production dips to less than 4Mtpa.
There will also be a profit share payment of up to 15% in any quarter in which the average iron ore price sits above or below US$100/tonne.
Fenix will fund all considerations from its existing cash reserves and operational cash flows.
Weld Range Resource
The Weld Range project has a measured, indicated and inferred resource estimate of 290Mt grading 56.8% iron.
The project comprises a number of high-grade deposits including Beebyn-W11 (20.5Mt at 61.3% iron), which featured in a 10Mt right-to-mine agreement between Fenix and Sinosteel in 2023.
Fenix has commenced a feasibility study that will combine existing production from the Iron Ridge and Beebyn-W11 mines with high-quality hematite direct shipping ore (DSO) deposits that make up the balance of the project.
Stranded Deposits
Fenix executive chair John Welborn said the Sinosteel agreement delivers on the company’s strategy to unlock the value of stranded iron ore deposits in WA’s mid-west region.
“Securing 290Mt of high-quality hematite DSO immediately surrounding our existing operations at Weld Range is a game changer for Fenix,” he said.
“This value-accretive agreement provides the inventory we need to materially expand our operations and extend our mine life.”
“It is a logical and significant expansion of our existing iron ore, road, rail and port asset base and provides an excellent foundation for further production growth.”