Iron ore producer Fenix Resources (ASX:FEX) has entered a binding agreement with Mount Gibson Iron (ASX:MGX) to acquire its Mid-West iron ore and port assets in Western Australia.
Under the agreement, the company will acquire the Shine Iron Ore Mine, 2 storage sheds at Geraldton Port, 2 Mid-West rail sidings, and assets at the Extension Hill Iron Ore Mine.
The consideration payable to Mount Gibson consists of $10 million cash and 60 million FEX shares upon the completion of the deal, along with 12.5 million 5-year options exercisable at $0.25 each and 12.5 million 5-year options exercisable at $0.30 each.
Fenix says the agreement will provide the opportunity to reduce costs and expand production at its existing Iron Ridge production. The deal also gives Fenix the chance to recommission Shine as a second production asset, create a ‘substantial’ new revenue-generating business from the provision of logistics solutions to existing and future Mid-West bulk commodity producers, and benefit from the expected growth in bulk commodity production and export in the region.
As part of the agreement, Fenix has negotiated new arrangements with the Mid-West Port Authority (MWPA) that, when executed, will merge the company’s existing facilities with Shine’s to enable it to operate a combined and integrated port business covered by a set of arrangements that provide Fenix with an incentive to grow production tonnes.
The company says these new arrangements are consistent with MWPA’s growth and expansion objectives, which aim to grow export volumes through Geraldton Port by more than 10 million tonnes per annum over the next few years.
At the port, Fenix currently holds Shed 13, a related truck, and rail in-loading infrastructure. The operation of sheds 4, 5, and 13 will allow the company to expand its own volumes at a lower cost and also offer new customers a ‘highly competitive’ integrated port and haulage logistics solution.
Fenix also says combining the 3 sheds under the same ownership provides the additional potential to blend iron ore products at the port and segregate iron ore products from other products such as base metal concentrates, potash, urea, silica sands, and spodumene concentrates.
Commenting on the agreement, Fenix Resources Chairman John Welborn says: “Acquiring Mount Gibson’s Mid-West iron ore and port assets is a game changer for Fenix.
Since 2003, Mount Gibson has mined and shipped more than 50 million tonnes of iron ore in the Mid-West using robust rail and port infrastructure. We are delighted to continue this successful regional legacy and to have Mount Gibson as a significant shareholder as we work to create exceptional future value.
“Acquiring Mount Gibson’s Mid-West iron ore and port assets is a game changer for Fenix”
The investment by Fenix will be immediately cash flow accretive to our existing business, allowing for cost savings in port and haulage costs for Iron Ridge operations of approximately $5 per tonne.
The Shine Iron Ore Mine is a shovel-ready mining project. We are excited by the potential to recommence mining and investigate the potential to market high-quality blended iron ore products.
The substantial port and rail assets we are acquiring have an assessed replacement cost of more than $80 million. The assets provide Fenix with valuable Mid-West rail transportation and Geraldton Port unloading, storage, and ship loading facilities, which are required by regional bulk commodity producers and exporters, allowing Fenix to diversify our revenue base by becoming a third-party logistics provider.
These acquisitions are a transformational event for Fenix and will drive material economies of scale, provide flexibility to expand iron ore production and operate new projects concurrently. In expanding a mine-to-port solution for ourselves and other producers in the Mid-West, we also create employment opportunities which will strongly support regional economic growth.”
Fenix Resources is an ASX-listed ‘high-grade, high-margin’ iron ore producer with assets in the Mid-West mining region of Western Australia. The company’s flagship Iron Ridge Iron Ore Mine lies about 360km northeast of Geraldton and is operating at a planned production rate of 1.3 million tonnes per annum.
The company’s latest quarterly report states it had $68.9 million cash as of 31 March 2023.
Write to Harry Mulholland at Mining.com.au
Images: Fenix Resources Ltd
