How Will Fenix Unlock Value from 290Mt Weld Range Iron Ore Resource?

A Transformational Mining Agreement

Fenix Resources Ltd (ASX – FEX) has announced a landmark 30-year right to mine agreement with Sinosteel Midwest Corporation (SMC), a subsidiary of China Baowu Steel Group; the world's largest steel producer. This deal grants Fenix exclusive rights to mine and export iron ore from the Weld Range Project in Western Australia's Mid-West region, unlocking a substantial 290 million tonne JORC-compliant hematite resource at an average grade of 56.8% iron.

The Weld Range Project, a significant direct shipping ore (DSO) deposit, adjoins Fenix's existing operations at Iron Ridge and Beebyn-W11 mines. The agreement consolidates Fenix's control over the entire Weld Range iron ore inventory, including the previously secured 10 million tonne right to mine at Beebyn-W11, effectively extending the company's mine life and production potential.

Financial and Operational Framework

Under the terms, Fenix will pay $60 million in cash over two years, alongside a tiered production royalty ranging from $4.00 to $5.00 per dry metric tonne and a profit share royalty of 10% to 15% of net profit after tax, depending on iron ore price benchmarks. Importantly, Fenix plans to fund these payments from existing cash reserves and operational cash flows, underscoring the deal's financial prudence.

Post-payment, Fenix retains 100% of earnings from iron ore sales under the Weld Range agreement. The company has committed to maintaining a minimum production rate of 6 million tonnes per annum, with collaborative ambitions alongside Baowu to target exports of up to 10 million tonnes annually.

Leveraging Infrastructure and Growth Prospects

Fenix's existing integrated mining, logistics, and port infrastructure; including its Newhaul Road Logistics fleet and Geraldton Port facilities; provides a strategic advantage to efficiently develop the Weld Range Project. The company has already commenced a feasibility study to optimize mining plans, accelerate production ramp-up, and explore cost efficiencies through scale and innovation.

The Weld Range resource includes multiple high-grade deposits such as Beebyn-W11, Madoonga, Beebyn North, and others, many of which remain underexplored by modern standards. This presents a compelling opportunity for Fenix to expand its ore inventory further, potentially increasing production beyond current contractual targets.

Strategic Partnership with Baowu Steel Group

This agreement marks a deepening of Fenix's relationship with Sinosteel Midwest and Baowu Steel Group, signaling a long-term commercial collaboration. Beyond iron ore mining, the partnership envisions future regional development opportunities, including magnetite projects and green steel initiatives, leveraging Fenix's infrastructure and Baowu's market reach.

Executive Chairman John Welborn highlighted the deal as a "game changer" for Fenix, aligning with the company's ambition to become a 10 million tonne per annum iron ore producer. He emphasized the value accretive nature of the agreement and the potential to materially expand operations and profit margins.

Next Steps and Market Implications

Fenix is advancing environmental and heritage approvals, detailed feasibility studies, and early-stage development planning. The company will host an investor briefing to discuss the agreement and its strategic implications.

For investors and market watchers, this deal not only secures a substantial resource base for Fenix but also positions the company as a significant player in the Mid-West iron ore sector, with a strong partner in Baowu Steel Group. The integration of mining and logistics assets could unlock operational efficiencies and enhance shareholder value over the long term.