Fenix Resources: Trading at 2x Op. Cash Flow with 2.5x Growth Ahead

A Sweet Spot In The Iron Ore Space.

Today we talk about iron ore! The overall situation may not be ideal, but this company has already tripled production, boasts strong grades, has solid infrastructure, and a management team that’s executing well. First, we’ll look at the iron ore landscape, and then we’ll look into the company itself.

Before we dive in, I want to highlight that this is a collaboration post featuring Hugo Navarro from Undervalued and Undercovered, who first proposed this idea. If you’re not familiar with Hugo’s work, he specializes in uncovering overlooked small-cap opportunities and manages a subscriber portfolio, which you can explore on his Substack. If you find today’s analysis valuable, consider checking out his broader research as well. This collaboration is entirely independent: there are no sponsorships or any kind of financial incentives involved: just a mutual interest in learning from each other and sharing insights.

Iron Ore: A Transforming Market

Buy what will still be used 10 years from now.

Take iron ore, for example: if you haven’t noticed, you’re probably sitting in a building made of steel, surrounded by cars, appliances, and infrastructure built with it. Looking at it this way gives a different perspective on what will disappear and what will endure.

Iron ore prices have undergone significant volatility over recent years, declining substantially from their July 2021 peak of approximately $219.77 per ton to current levels around $105 as of September 2025. Despite this correction, 2025 has shown surprising price stability, with iron ore maintaining a $96–$110 per ton trading range since late 2024.

The reason for this drop is largely cyclical. Concerns have emerged that China may have reached peak steel production and that iron ore demand could enter a long-term secular decline. At the same time, the Simandou project in Guinea, expected to add 120 million metric tons per annum (at peak) of low-cost, high-grade iron ore, threatens to shift the supply curve to the right and erode the major producers’ historic competitive advantage.

The bearish case rests primarily on China’s structural transformation. China’s steel demand is driving the biggest structural shift in global iron ore markets in decades. For 20 years, property construction soaked up most of China’s steel output and fueled nearly all global iron ore growth. That engine has now stalled. Over the past five years, China’s steel production has plateaued at around 1 billion tons:

Given widespread pessimism about a steel output collapse, it’s useful to examine how the composition and sustainability of demand have shifted:

As the data reveals, China’s steel consumption has structurally declined, reshaping both its sectoral composition and global market dynamics. According to BHP, building construction’s share of demand fell from 42% in 2010 to 24% in 2023, while machinery rose from 20% to 30% and infrastructure from 13% to 17%, reflecting a shift from property toward manufacturing and government-backed projects. These segments provide some resilience, but not enough to offset the broader slowdown.

Overall demand is still contracting. S&P Global Commodity Insights forecasts China’s steel production, which peaked at 1,065 million metric tons (MMt) in 2020, to fall from 1,005 MMt in 2024 to below 900 MMt by 2035, driven by a prolonged property slump (down 6.5% in 2025) and rising trade barriers, including U.S.-China tariffs and anti-dumping measures from India and Southeast Asia. This implies a 45.8 MMt drop in iron ore imports in 2025 (to 1,192 MMt), with a partial rebound to 1,254 MMt by 2029.

This Chinese decline creates a fundamental oversupply situation for the global iron ore market. Standard forecasts show seaborne supply exceeding demand by 50-100 million tonnes annually through 2028. However, this oversupply story masks a distinction that creates winners and losers within the sector.

While demand geography is shifting, an equally important transformation is occurring in ore quality requirements. The iron ore sector is undergoing a structural shift as average grades decline and demand polarizes, creating a two-tier market: premium producers capture widening differentials, while standard-grade suppliers face margin pressure. High-grade ore is crucial because steelmakers rely on it to improve blast furnace efficiency, reduce energy consumption, and meet stricter emissions targets.

The numbers confirm a deterioration in ore quality. Miners are progressively extracting from deeper, lower-grade deposits, most acutely in Australia’s Pilbara, which supplies ~60% of global seaborne ore. Reflecting this structural decline, S&P Global will lower its benchmark from 62% Fe to 61% Fe in January 2026, formalizing supply-side constraints rather than temporary market fluctuations.

While the overall iron ore market faces oversupply in 2025, the premium high-grade segment is tighter. Rising supplies, such as from Simandou, are gradually easing premiums, but sustained demand from decarbonization trends supports higher-grade ore. As of late September 2025, 65% Fe fines trade around $122/t, compared to ~$105/t for 62% Fe fines - a $17/ton premium.

Looking at different estimates, global steel demand is set to grow much more slowly than in the past decade. The OECD Steel Outlook 2025 projects just 0.7% annual growth through 2030, well below historical averages. Worldsteel forecasts a 1.2% rise in 2025 to 1.77 billion tonnes, with longer-term growth moderating to ~0.5–1% CAGR as China’s decline offsets gains elsewhere. S&P Global projects a similar range, with global demand expanding ~0.8–1.2% annually through 2030.

This slower growth shifts the spotlight to emerging markets, where growth is diffusing across emerging economies, with India leading in volume, while regions like Southeast Asia, the Middle East/North Africa (MENA), Sub-Saharan Africa, and Brazil offer specialized opportunities in infrastructure, renewables, and low-carbon production. Collectively, these markets could add 100-150 Mt of annual demand by 2030, offsetting a good part of China’s projected losses. Key drivers include GDP expansion (e.g., 6%+ in India), per capita gaps (e.g., India’s doubling to ~100 kg in a decade but still <20% of advanced economies), and policy support (e.g., India’s National Steel Policy targeting 300 Mt capacity by 2030).

Crucially, these emerging markets are driving demand not just for volume, but for premium quality products:

1. India: The Primary Volume Driver (8–9% Growth in 2025, 4–5% CAGR to 2030)

India is on track to become the “next China” for steel demand and premium products. Demand is expected to rise from ~133 Mt in 2024 to 143–145 Mt in 2025 (8–9% y/y), reaching 187 Mt by 2030 (7.2% CAGR).

Key Drivers: Urbanization (68% by 2050) and infrastructure (USD 1.4 trillion National Infrastructure Pipeline) account for ~60% of demand. Renewables (500 GW by 2030) and transport projects (high-speed rail) provide additional structural support. Per capita steel use has doubled to ~95 kg but remains <20% of developed markets.

Premium Opportunities: Green steel ambitions favor high-grade imports, with India becoming a net importer (+10–15 Mt by 2030). Environmental compliance further boosts demand for low-carbon steel, supporting premiums for high-grade iron ore.

2. Southeast Asia: Capacity Expansion and Local Infrastructure (3–4% CAGR to 2050)

Rapid industrialization and Chinese-backed projects drive growth. Demand rose 6% in 2024 and is expected to grow 3–4% annually through 2050 (~20–25 Mt added by 2030). Vietnam, Indonesia, and Thailand lead, with exports to China offsetting low-grade surpluses via high-quality imports.

Key Drivers: Infrastructure (USD 1 trillion ASEAN pipeline) and urbanization (50%+ by 2030) dominate, alongside manufacturing growth (EV hubs in Thailand).

Premium Opportunities: Adoption of green tech (e.g., hydrogen DRI) could add 5–10% premium demand, supporting high-grade ore even in a region with some low-grade oversupply.

3. Middle East & North Africa (MENA): Green Steel Hub (4–5% Growth in 2025)

MENA is emerging as a low-carbon steel exporter to Europe, leveraging cheap renewables (Saudi Arabia’s 200 GW solar) and gas. Demand grows 4–5% in 2025 (~15 Mt total) and 3% CAGR to 2030, driven by diversification from oil (e.g., UAE’s USD 100 billion green push).

Key Drivers: Infrastructure (NEOM) and exports (20–30 Mt low-carbon steel by 2030) to carbon-conscious markets.

Premium Opportunities: Positioning as green steel hub requires high-grade ore for efficiency standards, creating structural premium demand that supports higher-grade suppliers.

4. Sub-Saharan Africa: Long-Term Infrastructure Play (3–5% CAGR to 2030)

With <50 kg per capita use and a USD 100 billion annual infrastructure gap, this region has the longest runway (~10–15 Mt added by 2030). South Africa and Nigeria lead, supported by resources like Guinea’s Simandou iron ore.

Key Drivers: Urbanization (55% by 2025 in Nigeria) and projects like the African Union’s Agenda 2063.

Premium Opportunities: As infrastructure projects grow, demand for higher-quality ore may rise to meet efficiency targets, though the region’s low current base limits near-term impact.

5. Brazil: Sustainable Production Leader (2–3% Growth in 2025, 3% CAGR to 2030)

Brazil combines premium Carajás ore with 85% hydro/solar power, positioning it for low-carbon steel production. Demand is expected to rise 2–3% in 2025 (35 Mt) and 3% CAGR to 2030 (~10 Mt added), supported by BRL 100 billion (USD 16.5 billion) investments in capacity expansion.

Key Drivers: Infrastructure modernization and exports to EU under CBAM compliance.

Premium Opportunities: Sustainable production depends on premium ore quality, with Brazil’s green edge potentially capturing a 5% premium share, offsetting tariffs on high-emission steel and reinforcing structural demand for high-grade ore globally.

Simandou’s Nuanced Impact

Turning to Simandou, while the project adds 120 million tonnes of supply - seeming to worsen oversupply - its impact varies dramatically by ore grade. The project is targeting first ore shipments around November 2025, with production ramping up gradually over approximately 30 months to an annualized capacity of 60 million tonnes per year.

However, concerns may be overblown. As a lead investor in the Simandou project, Rio Tinto has strong incentives to avoid flooding the market: dumping excess supply would depress iron ore prices, erode margins across its broader portfolio (including high-volume Pilbara operations), trigger price wars with competitors like Vale, and undermine long-term shareholder value. Strategic goals favor maintaining market stability amid oversupply risks and weakening Chinese demand.

The Sweet Spot Idea

While the iron ore market faces structural oversupply that will pressure standard producers, companies positioned in the premium segment face a different competitive landscape. Quality producers benefit from expanding differentials, emerging market growth focused on higher-grade products, and supply constraints in their specific market segment.

While it’s true that Chinese iron ore consumption will decline, demand may be more resilient than forecast thanks to internal shifts within China and rising demand from other emerging countries. Imports to these markets are likely to remain strong because they favor high-quality and relatively low-cost products. The drop in Chinese consumption will mostly affect domestic production, which is low quality and expensive. In India, most production is low-grade (<58% Fe) and will likely become less desirable over time.

We find Fenix Resources to be in a sweet spot in this part of the cycle with its combination of rapid production scaling, cost leadership that enables it to withstand the downturn where many competitors are being pushed out of the market (especially Chinese producers), infrastructure leverage, transformational resource acquisition, and strategic market positioning in the premium quality segment that emerging markets increasingly demand.

In the base case, benchmark iron ore at 62% Fe is expected to average about $95 to $100 per tonne in 2025, then gradually decline to $78 to $83 per tonne by 2030 as Chinese demand cools and new supply comes online. Volatility will remain, with annual ranges likely between $70 and $105 per tonne.

In a bear case, sharper cuts in steel production or oversupply could push prices down to $70 to $90 per tonne overall, with the possibility of dipping below $70 by the end of the decade. In a bull case, stronger emerging market demand, delays at projects such as Simandou, or faster decarbonization could sustain prices between $90 and $110 per tonne, with some peak years reaching $105 to $120 per tonne.

For Fenix’s high-grade ore at 64.3% Fe, quality premiums are projected to widen as the market polarizes: $10 to $15 per tonne in the base case, $8 to $12 in the bear case, and $15 to $20 in the bull case as efficiency and environmental goals drive preference for cleaner ore.

Let’s go over the company now:

Fenix Resources (ASX: FEX)

The Business:

Fenix Resources operates a unique model in Western Australia’s Mid West, targeting small, high-quality iron ore deposits (typically in the 10, 20, or 30 million tonne range) that many larger companies would overlook as uneconomical. Instead of focusing on massive, consolidated assets, Fenix efficiently aggregates and unlocks value from these dispersed but premium-grade resources.

What sets Fenix apart is its high degree of vertical integration. The company manages every stage of the operation in-house, from mining through logistics and all the way to port management. By leveraging established but previously stranded resources and using its integrated infrastructure Fenix turns challenging geology into a competitive advantage. This strategy positions the company to dominate iron ore production in the WA Mid West, efficiently expanding its footprint as it consolidates access and economies of scale across multiple development-stage deposits with good ore quality and favourable mining conditions.

Fenix Resources demonstrates good management alignment. Executive Chairman John Welborn, who holds 22 million shares (2.97% of the company), has continued to increase his stake with 1.25 million additional shares purchased for AU$430,000 over the past six months, including recent market purchases in September 2025 for AU$0.34–0.38 per share. Insiders collectively hold 17.4 percent of all shares.

They have been executing well, with three mines now commissioned and producing at a combined rate of 4 million tonnes per year. They are targeting more than 10 million tonnes per year, while also using their infrastructure to service third parties. At current iron ore prices of around 100 USD per 62% Fe tonne, the company is profitable (EBITDA margins consistently above 17-19%).

Operations:

One of their main challenges is that even though they are producing at 4 million tonnes per annum, the current life of mine is only three to four more years. The key is to continue unlocking additional reserves, which they can acquire at low cost and integrate into their logistics network, thereby turning otherwise uneconomical resources into profitable ones.

This is why the recent Sinosteel agreement was truly transformational: it increased reserves by almost 300 million tonnes. The company has developed a strong competitive advantage in logistics and will likely continue expanding its infrastructure capabilities, which further strengthens its operational moat. In fact, the foundation of the company’s business model is built on logistics excellence, and in the future they could potentially leverage this infrastructure to mine commodities other than iron ore. Once this strategic positioning is understood, we can now examine the company’s mining operations in detail.

FENIX operates three mines in Western Australia’s Mid-West region with a combined production target of 4Mtpa achieved during 2025:

• Iron Ridge Mine: 1.4Mtpa capacity, premium high-grade operation with average grade of 64.3% Fe for lump ore and 63.2% Fe for fines

• Shine Mine: Restarted operations in 2024, with 1Mt shipped since restart under FENIX ownership

• Beebyn-W11 Mine: Commenced mining in June 2025, targeting 1.5Mtpa production with first shipment completed in August 2025

Mines details:

Iron bridge

Iron Ridge began production in late 2020 and quickly ramped up to a steady output of around 1.3 million tonnes per year of high-quality direct-shipping ore (DSO). The ore grades between 63% and 64% Fe with low impurities, which allows it to command a premium of about 5% over the standard 62% benchmark price. By mid-2025, the mine had already shipped more than 6 million tonnes.

Since start-up, Fenix has steadily reduced Iron Ridge’s C1 cash costs. Early operations saw unit costs near A$93 per wet metric tonne due to small scale and reliance on third-party logistics. However, the integration of Fenix’s own haulage operations and ongoing efficiency gains have brought significant improvements. By FY2023, C1 costs had dropped to around A$78/wmt, falling further to an average of A$77.9/wmt in FY2024 when the mine shipped about 1.5 million tonnes. By the June 2025 quarter, costs had reached approximately A$71.6/wmt. Overall, this represents a cost reduction of more than 20% since the mine opened, largely thanks to economies of scale and in-house logistics, which have helped offset broader industry inflation. As of Q4 FY2025, Iron Ridge remained highly profitable, with margins robust even at moderate iron ore prices.

Iron Ridge is a relatively small deposit but notable for its high grade. As of June 2024, remaining reserves stood at about 3 million tonnes, with resources closer to 5 million tonnes, supporting production until around FY2027 at the current run rate. Exploration is ongoing, and recent drilling has intercepted additional high-grade mineralization, such as 163 meters at 66% Fe. If these targets are successfully converted into reserves, the mine life could be extended by a couple of years, potentially keeping Iron Ridge in operation through FY2029. In effect, the mine began with a life of six to seven years but could continue into the late 2020s with successful resource extensions.

Shine Mine:

Shine is an open-pit iron ore project located about 230 kilometers east of Geraldton. Fenix acquired the project in July 2023 from Mount Gibson Iron as part of a broader Mid-West asset package. Shine had a short history under its previous owner, with mining starting in March 2021 and the first shipment made in August of the same year, before operations were suspended in October 2021 due to weak iron ore prices and high haulage costs. Fenix’s acquisition, together with its integrated logistics network, has since transformed Shine into a viable and profitable operation.

The project hosts a JORC Mineral Resource of 15.1 million tonnes at 58% Fe (as of mid-2022). After completing a detailed review and drilling program in 2023–24, Fenix approved a Stage 1 mine plan targeting the higher-grade zones at around 60% Fe. Stage 1 required minimal capital expenditure of about A$7.4 million. Production restarted in late 2024, ramping up to around 100,000 tonnes per month, or approximately 1.2 million tonnes per year, by early 2025. Stage 1 is expected to deliver 2–2.5 million tonnes of ore through FY2025 and FY2026. Beyond this, the company will evaluate Stage 2 and Stage 3 to exploit the remaining resource and extend the mine’s life, with decisions depending on market conditions and technical optimizations. Given the larger resource base, Shine could support 6–8 years of production overall, though later phases may require blending or selective mining due to lower ore grades.

Shine’s cost profile has improved dramatically under Fenix’s ownership. By using its own haulage and port facilities, Fenix has sharply reduced logistics expenses compared with the previous operator. At restart, Stage 1 cash costs were guided at about A$67.5 per wet metric tonne (FOB Geraldton), equivalent to roughly US$45 at the time. Initial costs were higher as operations ramped, with the March 2025 quarter at A$77.9/wmt, but by June 2025 they had fallen to just A$51.8/wmt, partly due to one-off sales of lower-grade stockpiles. Over the longer run, costs are expected to settle around A$67–70/wmt as guided. Shine also benefits from a shorter haul distance to port—about 300 kilometers, roughly 40% shorter than Iron Ridge’s—which directly reduces unit costs.

Although Shine’s ore typically trades at a discount to the benchmark 62% Fe index because of its lower grade, Fenix’s low cost base and integrated logistics ensure healthy operating margins. Stage 1 provides a solid two-year foundation, and with further investment Shine could evolve into a multi-stage operation lasting much of the decade.

Beebyn W11 Mine:

Beebyn-W11 is a high-grade iron ore deposit in the Weld Range, located about 20 kilometers from Iron Ridge. In October 2023, Fenix secured an exclusive right to mine 10 million tonnes under a landmark agreement with Sinosteel Midwest, a subsidiary of China Baowu Steel. This deal gave Fenix its first foothold in the large Weld Range project, which hosts nearly 300 million tonnes of resources, and marked the beginning of a long-term partnership with one of the world’s largest steelmakers.

The deposit contains a JORC Mineral Resource of 20.5 million tonnes at 61.3% Fe. Following a Definitive Feasibility Study completed in mid-2024, Fenix declared a Maiden Ore Reserve of 10 million tonnes at about 62.2% Fe, including 8.3 Mt in the Proven category. The DFS outlined a mine plan producing 1.5 million tonnes per year over nearly seven years, supported by a modest strip ratio of 2.2:1 and low pre-production capital costs of just A$22.9 million. First ore is scheduled for the September quarter of 2025, with ramp-up to full capacity by year-end. Once operating at nameplate, Beebyn-W11 will bring Fenix’s total production to about 4 Mtpa across its three mines.

Costs are expected to be highly competitive. The DFS projected a life-of-mine C1 cash cost of around A$77.5 per wet metric tonne FOB Geraldton. This figure includes mining, a new 17.6 km private haul road connecting Beebyn to the Iron Ridge route, and port handling. Proximity to Iron Ridge allows Fenix to reuse existing facilities such as the camp and access roads, reducing incremental overhead. Management expects Beebyn-W11’s costs to remain in the high A$70s per tonne, supported by scale benefits from an expanded trucking fleet and fully utilized port capacity. At these levels, the project is highly profitable: the DFS estimated average EBITDA of about A$48 million per year and an internal rate of return close to 190%.

The initial 10 Mt reserve underpins a mine life of around seven years, but the opportunity is far larger. Beebyn-W11 is just one part of Sinosteel’s Weld Range project, which hosts 290 Mt at roughly 57% Fe. In September 2025, Fenix announced a transformational 30-year agreement giving it exclusive rights to the entire Weld Range project. Under this deal, Fenix will pay A$60 million over two years, plus production royalties of A$4–5 per tonne and profit-sharing of 10–15% depending on iron ore prices. The company has committed to producing at least 6 Mtpa and is working with Baowu to target up to 10 Mtpa of exports.

In this context, Beebyn-W11 can be seen as Phase One of a much larger development. It provides an entry point into Weld Range while proving Fenix’s ability to integrate new deposits into its logistics network. Over time, further deposits from the Weld Range are expected to be brought into production, extending Fenix’s output well into the 2030s and positioning the company as a mid-tier producer in the Mid West.

Fully integrated operations:

A defining strength of Fenix Resources is its fully integrated mine-to-port logistics chain. The company manages every step of the process, from road haulage to port handling, which has consistently reduced costs and positioned the business for future growth. All ore is hauled by road to Geraldton Port—approximately 360 kilometers from Iron Ridge, 300 kilometers from Shine, and about 380 kilometers from Weld Range.

Road Haulage
Fenix operates one of the largest bulk road haulage fleets in Western Australia, with more than 70 quad-trailer road trains, each carrying around 150 tonnes. Haulage was originally managed through a 50/50 joint venture with Newhaul, but in 2022 Fenix acquired full ownership of the business. This eliminated profit sharing, improved fleet utilization, and delivered immediate savings. For example, Iron Ridge’s C1 cost fell from A$91.5/wmt in the June 2022 quarter to A$84.1/wmt in the following quarter despite high diesel prices, largely due to the integration. Since then, continued expansion of the fleet and operational refinements have driven further efficiencies. In FY2025, Fenix set a new haulage record with 806,000 wmt moved in a single quarter, equivalent to an annualized rate of 3.2 Mt purely by road. Shine benefits from a shorter 300 km haul, which contributes to its lower cost profile. For Beebyn-W11, Fenix built a new 17.6 km private haul road in 2025 to link directly into the Iron Ridge route, improving safety, shortening cycle times, and reducing reliance on public roads. Supporting infrastructure such as staff housing and a new Geraldton maintenance workshop further enhance productivity and reduce downtime.

Port Operations
Fenix exports exclusively through Geraldton Port. Initially, the company relied on third-party facilities, but in 2023 it acquired three large on-wharf bulk storage sheds and related infrastructure as part of a broader asset package. These facilities provide more than 400,000 tonnes of storage and can handle over 5 Mtpa, giving Fenix full control over stockpiling and ship loading. The impact has been significant: unit port costs have fallen, capacity has increased, and operational flexibility has improved. The company can now blend ores on site, manage vessel schedules more efficiently, and minimize demurrage. Port throughput has steadily climbed, reaching a record 760,000 wmt shipped in a single quarter during FY2025.

The value of these logistics assets is substantial. Management estimates that the port facilities alone would cost about A$200 million to replace, while the trucking fleet and related infrastructure represent another A$150 million in hard assets. Geraldton Port itself is targeting up to 30 Mtpa of exports in the coming years, with Berth 5 (used by Fenix) expected to handle more than 10 Mtpa. Fenix intends to capture this opportunity either through expanding its own production, particularly via Weld Range, or by providing third-party logistics services, which are already contributing additional revenue.

Rail Integration
To prepare for higher volumes, Fenix has also acquired two rail sidings at Perenjori and Ruvidini. These assets include a 1,000 tonne-per-hour telestacker and were historically used to transport ore from Extension Hill to Geraldton. While road trains remain the backbone of Fenix’s logistics, the company has flagged the potential to stage ore at Ruvidini Inland Port and eventually reopen the 190 km Perenjori–Geraldton railway. Rail will likely be required if production scales above 6 Mtpa, especially under the Weld Range expansion, and feasibility studies are already assessing pit-to-port options. According to the last FY Ruvidini became fully operational in July 2025.

Cost Optimization
The results of this integrated approach are clear. In FY2021–22, total C1 costs for Iron Ridge were in the A$88–90/wmt range; by FY2024–25 they had fallen to A$72–78/wmt. Shine has achieved even lower costs thanks to its shorter haul. Each additional mine adds volume that spreads fixed costs across more tonnes, driving unit costs lower. Looking ahead, the combination of economies of scale, further operational improvements, and eventual rail integration should allow Fenix to handle significantly higher production—up to 10 Mtpa—while maintaining highly competitive costs.

Financials

Revenue:

The company was able to substantially increase its revenue even though iron ore prices fell, as they were able to mine an additional 1 million tons of iron ore from their Shine mine. That has done little to profits as these have fallen significantly YoY, with net profit after tax at 5.4 million compared to 33.6 million in FY 2024, that was partially due to the lower iron ore prices with CFR at 101.1 instead of 119.5 in 2024, this along with increase in costs from starting production in shine, the developing of the Beebyn W-11 project and an improvement of the infrastructure and the logistics fleet.

COGS

Total COGS was partially affected by an increase in inventory which means that some production has been left unsold and this inventory will be sold in the coming months, is not a big amount of inventory so no major problem.

Other expenses:

To make things simple I think that we could estimate that management costs will probably remain at around 20 million as now the expansion has been mostly completed.

Balance sheet

Cash

FENIX maintains a strong balance sheet with A$56.8 million in cash as of June 30, 2025.

Debt

Overall the company has 85 mortgatges for their logistics fleet which comprise 73.8 million in maturities that will end in the next 36 and 60 months, as they are mortgatges the company will be probably paying part of the principal.

Hedging

On 15 August 2025 Fenix announced that it had secured 180,000 tonnes of additional iron ore hedging contracts between October 2025 and June 2026. With the additional tonnes, as at the date of this report, Fenix’s total iron ore swap hedge book comprises 580,000 tonnes at an average price of A$154.38/t out to June 2026.

Dilution

As at 30 June 2025, Fenix Resources had 741,144,534 ordinary shares on issue. Potential dilution arises from performance rights, options, milestone shares, and other share-based payments.

At year end there were 27,144,731 performance rights outstanding, of which 20 million were issued to key management personnel and 4,144,731 to employees. These may convert into ordinary shares if performance milestones are achieved.

The company also had 25.5 million options outstanding. These included 12.5 million consideration options issued to Mt Gibson Limited at an exercise price of 30 cents expiring in July 2028, 7 million consultant options at 30 cents expiring in July 2026, 3 million consultant options at 50 cents expiring in July 2026, and 3 million broker options at 50 cents expiring in July 2026.

In addition, there are 20 million milestone consideration shares to be potentially issued to the vendors of Newhaul Pty Ltd, subject to Newhaul hauling 10 million tonnes of ore. These shares were originally related to the acquisition of Newhaul and were issued to its founder, Mr Craig Mitchell.

Taken together, unissued ordinary shares under rights, options, and milestones amounted to 69,644,731 at the reporting date. If all were converted, the fully diluted share count would increase from 741.1 million to about 810.8 million, or roughly 9.4 percent above the current base.

After the balance date, 3 million FY23 performance rights vested and were converted into ordinary shares in August 2025. The company also announced a proposed Executive Growth Incentive Plan for John Welborn and Simon Mitchell, granting 30 million performance rights each, which will vest only upon meeting challenging share price hurdles of 60 cents, 80 cents, and one dollar on a 60-day VWAP basis. If approved and fully vested, this would add another 60 million shares.

In summary, the existing dilution pool could lift the share count to about 811 million shares, representing close to 9 percent dilution. If the new executive plan is approved and fully exercised, total diluted shares could rise to approximately 871 million, or about 17.5 percent dilution relative to the present.

M10 debt.

Twin Peaks is a small hematite DSO project in WA’s Mid-West, owned by 10M Pty Ltd. In late 2023, Fenix signed an Ore Purchase Agreement to acquire up to 500,000 tonnes and advanced a secured A$5 million loan, later protected by a Deed of Company Arrangement when 10M entered administration. Under the deal, Fenix retains all notional profit until the loan is repaid, along with proceeds from the first shipment and control of stockpiled ore. The first cargo of about 59,000 tonnes at 61.9% Fe was exported in March 2024. Although modest in scale, Twin Peaks is profitable at current prices, generates logistics revenue, and provided bridging tonnes and cash flow ahead of Shine and Beebyn-W11, while demonstrating Fenix’s model of monetising stranded resources through integrated logistics.

Athena resources equity ownership:

Fenix became the largest shareholder in Athena Resources in 2024, converting notes and taking a 37% stake (valued at about A$3–3.5 million). Athena is advancing the Byro Magnetite Project in WA’s Mid-West, which has shown potential to produce ultra-high-grade concentrate for the green steel market. John Welborn, Fenix’s Executive Chairman, also serves as Chairman of Athena. In July 2025, Fenix, Athena, and Warradarge Energy signed an MoU to develop a Mid-West Green Iron Project, aiming to combine local magnetite ore with green hydrogen to produce direct reduction iron products.

CEO (John Welborn):

John Welborn grew up in Western Australia’s Mid West and originally pursued a professional rugby career before moving into finance. After rugby, he became an investment banker specializing in mining finance, where he gained a deep understanding of how mining companies operate.

His first direct role in the mining industry came in 2014, when he joined Equatorial Resources to develop an iron ore project in the Democratic Republic of Congo. Unfortunately, the timing coincided with a sharp downturn in iron ore prices, and the project failed. He then moved into gold, becoming CEO of Resolute Mining in 2015. At Resolute, Welborn strengthened the balance sheet and oversaw production across several African gold mines before stepping down in 2020.

During the COVID lockdown in Western Australia, Welborn initially focused on potential gold opportunities. But in 2021, he came across Fenix Resources, which had just raised A$20 million to develop its Iron Ridge deposit. Impressed by the company’s “pop-up shop” approach—using low capital to quickly bring small but high-margin deposits into production—he began buying Fenix shares on the open market, ultimately acquiring 15 million shares. He then joined the board and was appointed CEO.

Welborn often says he “reverse-recruited” himself into the role. He believed Fenix could be more than a short-term cash generator. Under his leadership, the company expanded production beyond Iron Ridge, added Shine and Beebyn-W11, built a logistics business, and established a transformational partnership with Sinosteel/Baowu at Weld Range.

Today, he is Fenix’s largest second largest individual shareholder and is known for his disciplined focus on profitability, cost control, and logistics integration. His philosophy is simple: every dollar spent must be justified in terms of how many tonnes of ore need to be moved to pay for it.

Shares of each of the members of the management team.

Strange KMP dealings.

Most of these items are immaterial, such as minor subleasing activities to Athena and another company named Warradarge. However, one detail stood out: a company associated with the largest shareholder received a payment of A$13,000 for lending artwork to Fenix Resources’ corporate office. While these are insignificant amounts in the context of the business, they are interesting footnotes and a fun reminder of the kinds of quirky disclosures sometimes found in small cap companies.

Strong capital allocation policy

CZR Resources Acquisition - Cancelled

FENIX launched a takeover bid for CZR Resources in February 2025 but chose not to match a superior A$75 million offer from Rio Tinto’s Robe River JV in April 2025, demonstrating disciplined capital allocation. The company received loan repayment and break fee compensation.

It remains clear that the company pursues growth opportunities such as this acquisition but remains focused on getting the best value per each dollar leaving acquisitions such as this when they are not getting the desired value.

Valuation

To estimate current EBITDA generation, we ‘ll use a simplified approach.

Assuming cash costs of A$75 per tonne, shipping costs of A$26 per tonne, and CFR prices of US$100 (equivalent to A$151.4), the margin per tonne comes to about A$50. At 4 million tonnes per year, this implies gross profit of around A$200 million. Subtracting A$20 million of SG&A leaves us with approximately A$180 million in EBITDA. With the company’s enterprise value below A$400 million, this suggests Fenix is trading on low multiples compared to peer iron ore companies trading at 4-6x.

One broker report presents a useful chart of per-tonne profitability under different scenarios, using slightly more conservative assumptions. Given the uncertainties of mining—particularly Shine’s lower grade ore and operational ramp-up—a more realistic estimate may be closer to A$150 million in EBITDA for next year.

The first challenge with valuing Fenix on an EBITDA basis is that several of its mines have relatively short lives of mine, or risk lower quality over time, which could reduce margins. Starting with the bear case, we assume the company receives an index price of US$80 over the next three years. Applying a 10% discount for lower grade results in realised prices of US$72, or A$109.1 per tonne. This would reduce margins to less than A$9 per tonne, leaving the company barely EBITDA positive, around A$20 million after SG&A, and likely cash flow negative. In this scenario, the downside is limited by the value of the infrastructure, which management estimates at over A$350 million. Even if mining margins deteriorate, Fenix could still pivot fully to third-party logistics, protecting asset value.

In the base case, assuming realised prices of US$90 per tonne and a 5% discount to the benchmark, Fenix would achieve CFR prices of about A$130 per tonne. That leaves A$25–30 of margin per tonne, translating into A$100–120 million of gross profit and A$80–100 million of EBITDA if costs remain well managed. Even at this level, the company looks significantly undervalued.

The bull case is where the real upside lies. Under the Sinosteel agreement, Fenix is effectively committed to expanding operations and developing new mines. These will likely produce lower-grade ore, but the economics should benefit from scale and lower unit costs as fixed infrastructure is spread across higher volumes. Assuming an average realised price of US$100 per tonne after discounts, EBITDA could reach the A$150 million range within three years. At that level, the current valuation looks like a bargain. Moreover, if production scales to 10 Mtpa, the company transitions from being a small iron ore miner to a growth-oriented logistics and infrastructure play with multiple expansion options.

Ultimately, the real strength of Fenix is that it is more of an infrastructure business than a pure miner. Its logistics assets create a structural advantage, allowing it to acquire small or stranded deposits at low cost and make them viable. Over time, this model could be extended beyond iron ore to other commodities, reinforcing Fenix’s position as a strategic Mid-West logistics operator. There is a reason the founder of Newhaul, now Fenix’s largest shareholder, aligned himself with the business: the long-term value lies in controlling the infrastructure.

Boredom Baron Conclusion:

Fenix looks undervalued on a multiples basis compared to peers, but you could argue that the gap is justified by the relatively short mine life. While that’s true, I don’t see it as a real issue so far: they’ve already tripled production from 1.5 to 4.4 million tonnes while securing the game-changing 30-year Weld Range agreement, which adds 290 million tonnes of resources and provides a pathway to 10 million tonnes of annual production. On top of that I find that execution risk is mitigated by the fact that we are seeing insiders buying.

Looking at cash flows, they’re trading at just 1.9x price-to-operating cash flow at current iron ore prices. The upcoming benchmark shift from 62% to 61% Fe in January 2026 will only strengthen Fenix’s quality advantage, as their 64–65% Fe grades command expanding premiums in an increasingly differentiated market.

I also like the fact that they’ve built out infrastructure that provides both operational leverage and downside protection. Meanwhile, many domestic Chinese miners will face pressure to close unprofitable operations, especially in regions where imported ore is easily accessible and competitive.

Finally, Fenix has the financial flexibility to self-fund growth while maintaining strong margins, even in weaker pricing environments.

Hugo Navarro Conclusion:

I have a clear opinion on Fenix Resources: it is undervalued as a miner and holds enormous potential as an infrastructure play in the Australian Mid West. The market has only just begun to price in its mining growth, while largely ignoring the second part of the equation—the strategic value of its logistics platform. Although heavy exposure to iron ore is not something most of us, myself included, are especially keen on, the company has consistently generated excellent returns on investment from its mines. This allows it to increase production sustainably and at low cost. Once one mine is depleted, Fenix can simply acquire and integrate another, taking advantage of its existing logistics to turn small, stranded deposits into profitable operations.

A key risk is the discount applied to lower-grade ore (below 61% Fe), which could pressure margins if the company were to depend on it. However, Fenix has the flexibility to focus on higher-grade opportunities, including potentially the Athena project, which already shows strong promise.

In terms of valuation, it is difficult to measure the upside with precision, but the company clearly has multibagger potential and looks cheap at current levels. Dilution could become a concern, as there are significant outstanding options and performance rights that may expand the share count in the years ahead. On the other hand, management is heavily aligned with shareholders, which is essential for executing the strategy successfully in this market.

Sincerely,

The Boredom Baron and Hugo Navarro