Fenix Resources (ASX:FEX) is set to sell its assets, liabilities, rights and obligations relating to the decommissioned Extension Hill hematite operation for up to $2 million.
The $159.65 million market capitalisation company has signed a binding agreement to transfer its Extension Hill assets to private mining services company Terra Mining and resource development group Extension Hill.
Fenix says its consideration to be received under the deal includes a $250,000 cash payment from Terra either one month after the first shipment of ore from the Extension Hill Magnetite Project or 12 months after the completion of the sales arrangement, whichever comes first.
Fenix will also receive a royalty of $0.50 per tonne of material produced and sold from the Extension Hill project, up to a cap of $1.75 million.
The sale means Terra will also assume Fenix’s rehabilitation obligations of roughly $5 million relating to the historical mining operations at Extension Hill.
Fenix anticipates to complete this transaction early in the December quarter this year.
Commenting on the transaction, Fenix Resources Chairman John Welborn says: “The Extension Hill Magnetite Project is an exciting regional development. The Extension Hill assets we acquired from Mount Gibson hold little value for Fenix but have significant immediate value for the buyers as they move into production.
“The Extension Hill assets we acquired from Mount Gibson hold little value for Fenix but have significant immediate value for the buyers as they move into production”
The opportunity to recommission the Mount Gibson crushing and screening plant provides potential for larger-scale magnetite processing in the future.
Fenix is investigating further opportunities for collaboration on haulage and port services. The transaction is a logical consolidation which will provide Fenix with future payments of up to $2 million, while also removing a rehabilitation liability of approximately $5 million.”
The Extension Hill assets came as part of a package deal for Fenix when the company acquired Mount Gibson Iron’s (ASX:MGX) Mid-West iron ore, port, and rail assets earlier this year.
Key conditions precedent in respect of the Terra transaction include Fenix completing its acquisition of the Extension Hill assets under its contract with Mount Gibson and the parties entering into a deed of assignment and assumptions for the agreements governing the mining rights and related matters, as well as the existing native title agreement.
Fenix notes the consolidation of the Extension Hill assets and obligations provides the buyers with an opportunity to fast-track the Extension Hill Magnetite Project into production, with Terra expected to operate under the existing mining approvals.
Both companies are investigating additional opportunities for collaboration and cooperation with regard to haulage logistics and port services, which will further support the Extension Hill project.
Fenix Resources is an ASX-listed iron ore producer with assets in the Midwest mining region of Western Australia. As of 30 June 2023, the company had $76.1 million cash at hand, according to its latest quarterly report.
Write to Aaliyah Rogan at Mining.com.au
Images: Fenix Resources