A Sydney-based brokerage has thrown its weight behind a growing iron ore miner in Western Australia’s Mid West, saying it is set up for immediate and long-term growth with strong cash generation.
MST Access senior analyst Michael Bentley has suggested WA’s Fenix Resources Ltd (ASX: FEX) has the ability to almost triple its early September share price of 28 cents in the foreseeable future based on the performance of its current Iron Ridge flagship operation, its transport assets and the project pipeline it is looking to develop over the next 12 months.
At the end of August, the company told the market it had, during the 2024 financial year, achieved total iron ore sales of 1.46 million wet metric tonnes, generating a total sales revenue of $240 million – up 22 per cent on the previous year (when the amount was $196.8 million).
Earnings before interest, tax, depreciation and amortisation were $73.2 million, an increase of 36 per cent on FY23’s $53.9 million, while the net profit after tax was $33.6 million, which was 15 per cent more than the $29.3 million in last year’s corresponding period.
Additionally, as of the end of June, the miner had $77.1 million in the bank.
Fenix, which has its own port facilities at Geraldton and a wholly-owned haulage business made up of 200-tonne quad road trains, completed a record 25 iron ore shipments of Iron Ridge material consisting of 723,657 wmt (lump) and 739,384 wmt (fines).
Located some 360 kilometres northeast of the Mid West capital, the mine – as of June this year – had total mineral resources of 6.2 million tonnes grading between 59.9 (indicated) and 65.5 (inferred) per cent iron.
During July, Fenix announced the approval of the restart of mining at Shine, a project it acquired from Mount Gibson Iron Ltd (ASX: MGX) in the middle of 2023.
The company has already started site works, situated just south of the small town of Yalgoo, and is targeting production in the December quarter.
As it stands Shine has a total resource of 16.1 Mt with iron grades of 59.2 per cent (measured), 58.1 per cent (indicated) and 26.9 per cent (inferred).
Meanwhile, last October the mid-tier miner signed a binding agreement with China’s Sinosteel Mining Corporation securing the right to mine and export up to 10 Mt dmt of iron ore from the high-grade Beebyn-W11 deposit, which sits 20 km east of Iron Ridge in the Weld Range.
Here the total measured and indicated resource of 20.47 Mt has respective iron grades of 61.78 and 60.34 per cent, with the first production planned for 2025 at an annual rate of 1.5 Mwmt. Beebyn-W11’s mine life is currently seven years.
In his investment note, Bentley said WA’s Mid West hosted a diverse array of mining projects at various stages of development, with many in need of cost-effective transportation solutions.
Leveraging the miner’s logistics and infrastructure capabilities, he noted, Fenix could offer efficient, low-cost services to third parties, facilitating the seamless movement of products from mine to port and unlocking their projects.
In this regard, the miner has already made a $70 million haulage deal with China’s Gold Valley Group.
“This approach positions Fenix to expand its logistics business, optimise its assets at the Geraldton port, and boost cash flow and profitability,” Bentley noted.
“Furthermore, the integration of transport solutions may provide opportunities for Fenix to participate in regional projects and additional commodities on favourable terms.”
Bentley believed the company’s growth profile was strong and there were several key catalysts, both in the short and medium terms, which had the potential to drive the share price towards MST Access’ valuation of 68 cents “and to increase our valuation”.
“As the core asset of the group and the chief cash generator, the continued strong performance of Iron Ridge is key to the valuation and the performance of the stock,” he added.
“As a significant leg up in production and cash generation, the Beebyn-W11 project is a key next leg of growth for Fenix and its commencement is a key to our valuation.”
