How Fenix Plans to Boost Weld Range Output to 10Mtpa and Slash Costs by 27%

A Long-Life Expansion Plan

Fenix Resources Ltd (ASX, FEX) has released a comprehensive Scoping Study for its Weld Range Iron Ore Project in Western Australia’s Mid-West, confirming a pathway to expand production from 6 million tonnes per annum (Mtpa) in 2028 to 10Mtpa by 2031. The study extends the mine life to 2042, underpinning a 14-year operation horizon that leverages Fenix’s existing mining and logistics infrastructure.

The project’s production target of approximately 138 million wet metric tonnes is based predominantly on Measured and Indicated Mineral Resources, with a high-grade average iron content of around 58% Fe. Early years will benefit from higher-grade ore from the Beebyn Hub, averaging 61% Fe, before transitioning to slightly lower grades from the Madoonga Hub.

Cost Reductions and Infrastructure Investment

A key highlight is the projected 27% reduction in C1 cash costs to approximately A$55.4 per wet metric tonne FOB Geraldton, significantly below Fenix’s FY26 guidance midpoint of A$75 per tonne. This cost advantage is largely driven by the construction of a new 244-kilometre private haul road, which will shorten haulage distances by about 20% and enable the use of larger payload trucks, enhancing operational efficiency.

The total development capital is estimated at A$521 million, with the haul road accounting for over half of this investment. Capital expenditure is planned primarily from 2028 onwards, allowing Fenix to prepare funding through operational cash flows and external debt. The company has already generated strong operating cash flows and maintains positive relationships with tier 1 lenders, positioning it well to secure the necessary financing.

Robust Financial Metrics and Market Positioning

Financial modelling based on a long-term iron ore price of US$85 per dry metric tonne (CFR 61% Fe) and an AUD, USD exchange rate of 0.65 delivers a pre-tax net present value (NPV10) of approximately A$1.2 billion and an internal rate of return (IRR) of 60%. The project’s payback period is estimated at 2.6 years, reflecting low capital intensity and strong cash flow generation.

At current spot prices near US$107/dmt, these metrics improve dramatically, with a pre-tax NPV10 of A$3 billion and IRR exceeding 160%, underscoring the project’s sensitivity to iron ore market conditions. The Weld Range Project’s breakeven iron ore price is estimated at US$67/dmt CFR, well below prevailing prices and global peers, positioning Fenix as a low-cost, high-margin producer.

Strategic Logistics and Market Access

Fenix’s integrated logistics model includes ownership of haulage fleets, rail sidings, and port facilities at Geraldton, enabling streamlined transport from mine to export. The company recently completed a successful trans-shipping trial at Geraldton Port, allowing increased vessel payloads without additional port calls, further reducing shipping costs and enhancing export capacity.

The marketing strategy targets key Asian steelmaking regions with stable demand for mid-grade fines and lump products. Pricing assumptions align with the 61% Fe Qingdao benchmark, adjusted for product quality and impurity penalties, ensuring competitive positioning in established markets.

Next Steps and Risks

Fenix is progressing a Definitive Feasibility Study (DFS), expected by June 2026, which will refine technical and financial assumptions and explore further value accretive opportunities such as mining fleet optimisation and autonomous haulage. The Final Investment Decision (FID) is targeted for 2028, with construction commencing shortly thereafter.

Key risks include securing tenure and regulatory approvals for the private haul road, potential capital cost escalation, and commodity price volatility. However, Fenix’s strong stakeholder engagement, existing infrastructure, and financial discipline provide a solid foundation to manage these challenges.