Fenix spends $25m on Mid West assets

Fenix Resources is set to buy Mount Gibson Iron's Shine iron ore mine, currently on care and maintenance, and its rail and port assets in the Mid West under a $25 million deal.

Fenix chairman John Welborn told shareholders this morning that to restart the Shine mine he would expect to spend an amount similar to the $11.9 million poured into getting its flagship Iron Ridge project in the Murchison region to production. 

But Mr Welborn said the company would take some time to plan exactly how and at what scale it would restart the operation, which is dependent on price. 

Located 230 kilometres south-east of Geraldton, the Shine mine was only producing for a year before Mount Gibson suspended operations in late 2021 due to a deterioration of iron ore prices and increased freight costs at the time.

Under the deal announced this morning, Fenix will pay $10 million in cash and provide $15 million worth of shares, making Mount Gibson a major shareholder with an 8.6 per cent stake in the iron ore and road haulage company.  

Fenix will also acquire a large-scale crushing and screening plant and an interest in a 138-bed mining camp situated at Mount Gibson's closed Extension Hill site south of the Shine mine. 

The miner will also take possession of two storage sheds at the Geraldton Port and two rail sidings to provide access to the main Mid West rail network connecting to the port. 

In an ASX announcement, Fenix said it expects the additional storage at the port to enable the option to ramp up production at Iron Ridge, from which it trucks ore to the port for export. 

Fenix expects the use of its Fenix-Newhaul haulage company, which was formed to provide transport and logistics services for Iron Ridge, to provide cost savings for the Shine operation. 

Mr Welborn said the acquisition was 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 operation of approximately $5 per tonne,” he said.

“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.”

Following the sale, Mount Gibson will focus on its Koolan Island iron ore mine in the Kimberley, according to chief executive Peter Kerr.

“It also enables Mount Gibson to realise value for assets not presently reflected in its market price, and free the company to concentrate on maximising cash flow from its high-grade Koolan Island iron ore mine in the Kimberley region and to pursue new resources investment opportunities,” he said.

Under the deal, Mount Gibson will be entitled to appoint a nominee director to Fenix’s board while it holds at least a 10 per cent shareholding in the company.

Poynton Stavrianou acted as financial adviser and Hamilton Locke acted as legal counsel to Fenix.