Fenix nails down a mega iron ore deal with Baowu

Fenix Resources (ASX FEX) has transformed its growth profile overnight, inking a 30 year right to mine agreement that secures the entire Weld Range iron ore project in Western Australia’s Mid West. The prize is a JORC resource of 290 million tonnes grading 56.8 percent iron, a vast upgrade to the company’s current inventory.

The deal is struck with Sinosteel Midwest Corporation, a subsidiary of China Baowu Steel Group, the world’s largest steelmaker. For Fenix, the agreement is more than a simple supply arrangement. It represents a foundation for a long term partnership with Baowu, positioning the company as a central player in the Mid West iron ore story.

Executive chairman John Welborn was in no doubt about the scale of the opportunity. “Securing 290 million tonnes of high quality hematite direct shipping ore immediately surrounding our existing operations is a game changer for Fenix,” he said. “Aligned with our aspiration to become a 10 million tonne per annum producer, this value accretive right to mine agreement provides the inventory we need to materially expand our operations and extend our mine life.”

The Weld Range project has long been one of the Mid West’s stranded assets, rich in hematite ore but lacking a champion with the transport and port capacity to bring it to market. Fenix believes it is that champion. Through its logistics arm Newhaul, the company already controls haulage fleets, inland port storage, Geraldton port sheds and rail siding capacity. By integrating Weld Range into this network, the company expects to unlock significant efficiencies.

The consideration is not trivial. Fenix will pay Sinosteel $60 million in staged cash over two years, alongside a production royalty of $4 to $5 per tonne depending on volumes and a profit share royalty of 10 to 15 percent depending on iron ore prices. Funding will come from existing reserves and cash flow, with Fenix retaining 100 percent of project earnings after these obligations.

The numbers highlight why Fenix is bullish. The agreement obliges the company to maintain production of at least six million tonnes a year, with a joint ambition with Baowu to reach 10 million tonnes annually. To put that in context, Fenix only commissioned its third mine earlier this year, reaching a run rate of four million tonnes. The Weld Range adds decades of potential growth.

Geology supports the optimism. The project’s Beebyn and Madoonga deposits carry significant tonnages of higher grade ore above 60 percent iron, consistent with the company’s existing direct shipping product. Much of the tenement remains underexplored by modern methods, leaving room for resource growth.

Critically, Fenix will begin a feasibility study immediately, incorporating environmental and heritage surveys, mine design, and haul road planning. The target is to move into commercial production within 24 months.

For Baowu, the deal secures a long term supply partner in a stable jurisdiction. For Fenix, it provides the scale to shift from being a niche producer into a significant regional player.

The agreement could reshape the fortunes of the Mid West, long overshadowed by the Pilbara giants. While production targets are subject to study, and royalties will trim margins, the Weld Range transaction cements Fenix’s position as the company that finally unlocked one of WA’s great stranded ore bodies.