Progress.
Now, as you may be aware, yesterday, Thursday, the 23rd of April, Fenix published an ASX announcement under the banner Quarterly Activities Report. I'll shortly be joined by Fenix Executive Chairman, Mr. John Welborn, who will discuss the announcement and answer some of your questions. Just some information before we do get started. This is a live webinar being held via Automic's online meeting platform, which lets shareholders and investors participate and ask questions in real time. You can do that at any time by just clicking the Q&A icon at the bottom right of your screen. That'll open up a new screen, and at the bottom of that screen, there's a section for you to type your question. When you're done with that, just hit enter on your keyboard and that'll send your question through.
Now, if we get a number of questions on the same topic, I might leave some of those out just so we can cover as many topics as possible. If we do run out of time and don't get to answer all the questions that have been submitted, John has indicated that he will answer them in due course via email. You can send your questions at any time, and we'll get to as many of them as we can later in the webinar. For now, it's my pleasure to pass over to Fenix Executive Chairman, Mr. John Welborn, for some introductory comments on the March quarterly announcement. John, over to you.
Thanks very much, Mick, and thanks very much for everyone interested in Fenix joining the webinar live, or if you're watching this on replay. The first thing to say is congratulations to the Fenix team across our mining, our logistics, our port, our marketing, and our corporate business. We've made mention of the challenges we faced in the March quarter. Physically, by the Tropical Cyclone Narelle, that bore down on the Mid-West and Geraldton late in the quarter. As well as the impact of the instability in the Middle East, and particularly in relation to both the supply and the price of diesel. I think it's a quarter where we demonstrated both our resilience and the control we have in managing an integrated supply chain. You see that in the numbers.
People might be surprised that we actually had our best quarter for C1 cash costs for some period of time at $70 a ton, the bottom end of our guidance and a drop from the previous two quarters. That was really achieved by the outperformance of our mining business, which offset the additional costs that we're incurring in relation to the rise in diesel prices. We mined just under 1 million tons during the quarter. That was impacted by the cyclone. Shine mine, we evacuated, and our operations of the Weld Range closed and did require dewatering after that rain event, as well as the impact on the Mid-West main roads closing the public roads, which impacted our haulage. The Port of Geraldton that you can see behind me was also closed, and that impacted our shipping significantly.
Having said that, you'll see that we processed more than 1.2 million tons. Drew down on our ROM stockpiles at our mines, and had a fantastic quarter in terms of producing finished goods. We ended up shipping just under 1 million tons to deliver that cost result, which meant that our cash balance grew during the quarter to now having AUD 86 million in cash. Which, given our market cap at the moment, represents a significant percentage of the value that the market's currently seeing in Fenix. Another aspect of the quarter was to look at the realized price. That was just over AUD 145 on a CFR basis. That comes out at just over $101 a ton.
Demonstrating, 1, the ongoing strength in iron ore prices, and 2, our ability to get very strong pricing for our products, particularly in considering some of the lower grade material that we sell from the Shine mine. $101 over the March quarter is very close to the 61% index price. Very good performance from our marketing team. We have a strong hedge book. Interested parties will notice that we continue to opportunistically extend our Australian dollar iron ore swaps, which protects the strong margin we generate. We've now added to that, in addition to protection, insurance protection in buying calls on the Australian dollar, which is a position which is significantly in the money given the strength of the Australian dollar.
Very early on in the war, in the first week of the Middle East instability, we added a significant position of diesel hedging in FY 2027. Interested parties will have noticed that while the spot prices at that point had elevated significantly, the forward curve on the oil price and diesel hadn't moved very much. We were able to lock in 18 million liters of diesel at just above our budgeted price. That is providing us significant protection. Very pleased with the team's performance in prioritizing the safety and wellbeing of our staff in relation to the response to the cyclone. Particularly proud of how we've responded to the challenges in sourcing and managing fuel, which has been a critical impact across the mining industry, in Australia and particularly Western Australia. Very pleased also that we communicated very clearly about how we were managing the business.
Most importantly, that we have confirmed our commitment to achieve our guidance this year to produce between 4.2 and 4.8 million tons of iron ore over the 12 months, at a cash cost of between AUD 70 and AUD 80. With the iron ore price ticking up, back up towards USD 110 a ton. Today it's 107. That's a very good sign for our business. We're looking forward to having a strong end to the financial year. Very interested in questions from participants. Over to you, Mick.
Fantastic. Thanks, Jon. Good summary. As usual, we'll start with some questions from the broker research analysts who do cover Fenix. A reminder, if you would like to put a question in, there's that Q&A icon at the bottom of your screen. You can send your questions at any time. We'll start with Michael Bentley from MST. He's got a series of questions. He says first question is on this quarter's C1 cost. The costs were lower this quarter than the previous two. Is there any specific reason for that?
Thanks, Michael. Yes, as I mentioned, it was really around an outperformance from our mining business, particularly at Shine, where the strip ratio halved during the quarter. We were able to access ore very efficiently at Shine. We also drew down on raw stockpiles on all of our mines, and so was able to very efficiently produce iron ore from the mining side. That offset some of the rises that we saw late in the quarter in relation to diesel price. A very good performance. Looking forward, that was at the bottom end of our guidance. I think at the moment, we're really prioritizing production, in the June quarter, making sure that we try and get towards the midpoint of guidance, due to the delays we suffered in the March quarter. At the moment, we're tracking towards the lower end of production guidance.
This will be a quarter where, in the March quarter, we're at the bottom end of that 70-80 C1 cash guidance. I would expect that we'll be towards the top of the guidance range during this quarter, but we will still manage, given the performance during the year, to fit within the cost guidance over the year. We will see some reversion to normal in our mining business and some of the diesel price impacting both the mining and the haulage business in the current quarter. Generally, we're demonstrating now consistently over the last several years, an ability to control and maintain our costs.
As I'll point out, that's in the face of double-digit inflation. We're somewhat unique in the iron ore business of being able to continue to find efficiencies, and continue to surprise people of our ability to deliver iron ore at a very reasonable cost given our current scale and our current infrastructure solutions. I can't talk about our C1 costs without reminding people that we've published a scoping study on the twenty-third of December last year that identifies how we can bring those costs in the mid-70s down into the mid-50s, putting us in the lowest half of the global cost curve. That's an even more exciting target for the Fenix team, who, as I say, are doing a great job to deliver iron ore at the cost we are currently.
Fantastic. Next one's a two-parter. Michael says, how confident do you feel about the continued availability of diesel to your operations? What sort of processes you may have put in place to lower the risks of diesel not being available?
Well, I'm as confident as anyone can be if you look at the news and read the newspaper in relation to the fuel crisis and the Strait of Hormuz. Clearly, Australia, as we know, is exposed to the requirement for diesel to arrive into the country. Across the country, we have 30 days supply. If that supply stops, then in 30 days there's no diesel. However, from a Fenix perspective, we've really focused on diesel strategy, particularly our storage strategy and our relationship with both distributors and importers of fuel, both nationally and internationally. That's been a major focus since this situation started. I think we've been very proactive. You can see that in the fact that we got into the market and hedged diesel. We are confident in the commercial arrangements we have. If Australia has fuel, Fenix will have fuel.
Because of that confident supply, we're now focusing more on managing our cost. Early in this crisis in order to guarantee supply, we secured deliveries from Darwin. People in Western Australia will have noticed the diesel at the bowser in a petrol station has been above AUD 3 a liter. There have been circumstances where we're paying those sort of prices where our budgeted price is AUD 1.50. That is a big impact. We're now seeing prices back down for us around AUD 2.15, and that's just a headline price. That doesn't include the excise that we receive. Supply, we're confident, with the qualifier that the whole country needs to actually have supply in order for it to be delivered to important industries like mining and like Fenix. Given that constraint and challenge, if there's fuel in Australia, Fenix will have it.
We're now focusing on working as hard as we can to limit the impact of the rising diesel price above our budgeted price.
Just on that, Michael says, on the price of that diesel, can you give any indication of what you might think it will add to C1 cash costs on a per ton basis over the next quarter or two?
Look, at that elevated price up towards AUD 3, the impact on Fenix was roughly around AUD 5 a ton on our C1 cash cost. There has been a bigger short-term impact actually on Fenix on shipping and freight rates. Both of those are now coming back. A headline answer to Michael or anyone's question, and it is a common question, how should we think about diesel? If we saw prices back up around AUD 3, the impact on our C1 cash cost is around AUD 5 a ton. Just on those shipping rates, I'd remind people that when you look at our C1 cash cost, let's call it in the middle of our guidance at AUD 75.
We got very close to achieving a CFR price for our product of AUD 150. The way to think about that in terms of an operating margin is you take our C1 cash cost, which is the operating cost of getting our iron ore out of the ground and all the way to Geraldton Port. On top of that, we have to pay royalties of 7.5% to the Western Australian government, very minor royalties to the traditional owners. Then we have shipping, which has averaged recently from $16 US all the way up to $28 US at the height of the fuel crisis. We're seeing it come back down towards our average budgeted price at the moment. The result of that shipping is a key component of then calculating our net margin.
We're working on delivering the best outcome we can for the June quarter.
Okay. Just a load of questions coming just about the diesel from Roger Tindall. Says, "Any consideration of alternative fuels for trucking, electric or gas?
Absolutely. We've been at the forefront of looking at dual fuel technology. In our current business, both in terms of the mining fleet and clearly in the haulage fleet, and clearly in shipping, we're currently reliant on effectively diesel fuel and bunker fuel. We're very interested in any opportunity to reduce our reliance, reduce our environmental footprint. We are doing work in relation to some of our partners in the Mid-West, Warradarge Hydrogen, Athena, and others, looking at solutions and dual fuel technologies. At this stage, we're not ready to implement any of those technologies, but we continue to search for solutions.
Right. Now, Michael had a question about shipping costs, but I think you've covered that. He says, "Just on the DFS for Weld Range and the shift of completion into the second half of the year, was there any particular driver of the change in timing? Do you think it will have any effect on timing of the FID?
Good question. The definitive feasibility study on the Weld Range project effectively represents our FID or for those not familiar with that term, financial investment decision. If you look backwards at Fenix's history, we published a feasibility study for Iron Ridge, and then we delivered it on budget and on time. We published a feasibility study for the initial mine at W11, and then we delivered on that feasibility study and we're happy to be tracked against it. We did the same thing for the recommissioning of the Shine mine, published an estimated capital cost, and an estimated operating cost, and a timeline, and then we delivered those mines. We're very focused on continuing to deliver to expectation. We published a scoping study in December of 2025. That followed on the three-year guidance we published in early December, which was our production outlook for FY 2026, FY 2027, and FY 2028.
The scoping study envisaged the Weld Range expansion project from FY 2029 onwards. The definitive feasibility study continues to do so. What is our production from the 1st of July 2028 onwards? Pleasingly, the guidance that we're now expecting that definitive feasibility study, and therefore the financial investment decision for that project to be in the back half of calendar 2026. To answer Michael's question, it's actually driven by good news. The more we look at the geological database of Sinosteel and the 290 million tons that we now have an exclusive 30-year license to mine, the more upside we see in relation to the product quality, the blending opportunities. We're doing a lot more work, and we're really getting down into the detail of how we can maximize the grades of our products and reduce the mining cost from the scoping study.
There are a number of opportunities we've identified. Because the definitive feasibility study is actually the project that we will deliver, both in terms of capital cost, operating cost, and most importantly, timeline. Goran Seat and his team, our Chief Development Officer, are taking the time and putting a great deal of effort and energy into making sure that we maximize the value from that project. When it's ready, it'll be an exciting moment, and that'll be in the second half of 2026.
Okay. You may have covered it, but Max Clipstone, again, a related question. He says, "Is there anything new you can add around the potential funding structure for the Weld Range?
Look, we continue to talk with our key partners, and reminding people that the Weld Range project is effectively a partnership between Fenix and the world's largest steelmaker, Baosteel. We continue to talk to them about their potential support for the financing of the project. We continue to add to our cash balance. At the moment, we've got a very simple balance sheet. We use chattel mortgage debt structures to finance our haulage fleet. We don't have any project financing or senior debt of any material nature at the head company level. All of those options, we've got time to develop that funding strategy. This is a very compelling project for potential financiers.
Right. Michael's final question is on hedging. He says, "You have hedges in place on iron ore price, call options on currency and diesel fuel hedges for 2027. I was wondering if you might be able to give us a kind of holistic view of your hedging and how much of the business is protected by the overall hedging.
Well, holistics, I'm not sure what Michael means, but I think I can give a strategic view of our hedging. The first thing that I always mention when people ask about hedging is that we don't believe that hedging removes any responsibility for us to manage our costs. The one part of our business that we don't have control over directly is our revenue line. Most of our hedging strategies are around managing a volatile iron ore price. Now, we've actually seen, I think, stability in that iron ore price, particularly above $100. Hedging strategies protect us if we saw a decline in iron ore prices below that level, which has often been the forecast over the last five years of bulk commodity analysts. In every case, has proven not to be actually an accurate forecast. Long may that continue.
However, if it doesn't, our hedging strategies really give us a time benefit to readjust our business in relation to changes in the iron ore price. More recently, we've protected ourselves actually more like an insurance policy in relation to the strengthening Aussie dollar. Clearly we've locked in some opportunistic diesel pricing. Holistically, we're opportunistic. I think we're quite conservative. Most importantly, the strength of Fenix is our ability to manage our costs directly. Our mining team, and our mine plans, and our product quality control, our haulage team in relation to the technology, the efficiency that we can move iron ore 500 km from the Weld Range all the way to Geraldton. Our entire corporate focus is not to see hedging as protecting us from the responsibility of managing the business.
I really hope that quarter-over-quarter, people are starting to see just how good a job those teams are doing in delivering iron ore at the cost that we have told the market we will deliver it at. That is increasingly putting Fenix in a unique position of reliability and consistency.
Great. Thank you, John, and thank you, Michael. David Brennan from Petra Capital has a couple of questions. He says, "The timeframe for closure of mining at Iron Ridge and Shine, timing of processing the last ore looks like volumes from Shine were impacted by rescheduled shipments as well as lower mined tons.
Yeah. That's correct. We unfortunately were looking to have another +1 million ton shipping quarter. We had 2 ships that were actually rescheduled into the current quarter due to the closure of Geraldton Port. There has been some movements around Shine shipments and Iron Ridge shipments and W11 shipments because of the weather condition, because of road closures, and also just managing the business. That demonstrates the flexibility we've got. Reminding everyone that we're in a transition. We are closing, completing the Shine mine. We've actually looked at the ore availability there and actually pleasingly, we may see Shine continue to produce in the second half of this year. Iron Ridge, there is some more ore as we know and as we've identified there, but it's deeper and we've got better opportunities in the Weld Range.
Really the timing to answer that question about how much we continue at Shine and Iron Ridge, and demonstrating the flexibility is really around when we get approvals to open our next mine, which is W10. Which is just along strike from W11. We have the appropriate applications for new mining approvals at W10. We're hoping to get those in the middle of the year. When they arrive is when we'll transition that to maintain that production flow through into the Beebyn Hub. That's something to look for really, and more clarity on that when we publish our June quarter and look forward into the guidance for FY 2027.
Could be a good time to throw in a question from Adam W. He says, "Can you talk about the process/team involved in identifying potential deposits?
Look, we've been privileged of the AUD 1.3 billion exploration and investments made by Sinosteel and others in the Weld Range in defining these resources. At the moment, we haven't deployed any exploration teams. We're reevaluating the significant exploration that's been done across the Weld Range. As I said earlier, we're seeing an enormous amount of upside. Fenix is really driven by the monetization of the opportunities and the investments of previous exploration teams going all the way back to 1870. We've demonstrated that we have a fantastic production operating supply chain, and that's what we focus on. There is no doubt that as we produce and ramp up production towards 10 million tonnes, and potentially beyond 10 million tonnes, we will look at future exploration upside and geological extension of the ore body. We're nowhere near tapping out.
If you look at the map plan of the Weld Range and look at the number of different deposits and the extension of that geological field, you'll see that there is obvious opportunities to extend. We look forward to doing so. At the moment, the focus is on defining an ore reserve. We have a resource largely indicated in the Weld Range of 290 million tonnes. What the definitive feasibility study will do is convert that into an ore reserve, and that'll be the tonnes that we produce. Now, once we've done that, we'll then look at the exploration potential and future opportunity to both extend that resource base, but also upgrade the quality of our product suite.
Great. Next one from David, probably just a confirmation from you, John. It's on topics of excellent C1 cash costs in the quarter, some guidance on impact of higher fuel prices on costs going ahead, and David said, "I estimate at least $5 a ton increase," which it did. What's your mention on that?
Well, he's bang on there.
Yeah.
If you think about our cost, diesel was probably 20% of our cost before the Middle East crisis. If you then extrapolate the rise in diesel cost on that 20%, you end up calculating it's going to be give or take around AUD 5 a ton impact. I do think that that's coming down. We're seeing shipping rates coming down. If we saw things stay where they are now, then I think that in the June quarter, you'd see our costs either at or even slightly above the top of our guidance of AUD 80 a ton. From a full year guidance perspective, given the strong performance we've had in the September, December, and March quarters, we still are aiming to get around the midpoint of our guidance of AUD 75 a ton. That's an overarching view of how that diesel price is impacting us.
Going forward, we'll be looking to bring those costs down as much as we can and as every consumer is looking forward to seeing more stability and more consistency in the price of all of the fuels that we're using.
Again, you may have covered this one. David's last question: the timing of Weld Range DFS, likely September quarter or December quarter?
Look, it's when we'll actually complete that work. It's around the opportunity we have to improve and maximize the outcomes of the project, particularly from a geological base. It's also making sure that we don't rush that outcome. We want to be very, very clear with the market. We want to continue to deliver that project, reminding people why that's important, the NPV of the scoping study at the spot price when we announced it is AUD 3 billion. Now, we have a track record of actually outperforming the NPV of the projects that I mentioned earlier, the Iron Ridge Mine, the W11 project, and the Shine Iron Ore Mine. We've delivered more value than you would have expected when we published the feasibility studies for that project. I have every confidence that we will absolutely deliver more value than we demonstrated in the scoping study.
If you're an investor in Fenix or you're interested in Fenix, just think about what that means. That AUD 3 billion NPV does not include the 15 million tons of iron ore that we're planning to produce in FY 2026, FY 2027, and FY 2028. That's just the project from FY 2029 onwards and the value that that will generate, net value that will generate for shareholders. It also doesn't include the value of the cash we already have on our balance sheet and the significant value in the hard assets that we own and are investing in. I'm not giving any guidance on when in the second half of this calendar year we'll complete that study. It'll be when we're ready, and it'll be a very exciting outcome for shareholders.
Yeah. Fantastic. Thanks to David. Peter Schwarzbach of Wallabi asks, "Could you advise the amount of ROM stockpiles across each of the three mining hubs?
Well, thanks for that question, Peter. It's a bit of a cheeky one. We don't generally disclose that. I think the guidance I could give, and you can see that in the way our mining numbers are moving quarter-over-quarter and our processing numbers, and then our shipping numbers, particularly where we have disruptions and weather events. There's a lot of flexibility in our system. We do that to ensure the consistency of the supply chain so that there's always tons available for the haulage team. We've got almost 500,000 tons of storage capacity at the Geraldton Port behind me. That means we can manage the situations as we've shown in the March quarter.
To answer that question, probably easiest just to say that in terms of ROM stocks across the three operations and the three crushing and screening plants, at any one time, we have between 3 and 500,000 tons of material on the ROM pads. Interestingly, probably a similar amount in finished goods across the product stockpiles in lump and fines we have at all three of those crushing plants. Then the finished goods that we have at any one time in our port sheds. There can usually be between 500,000 and 1 million tons of both ROM, that is mined, run-of-mine stocks, and finished goods. That's a significant asset base. It's a good question, Peter. It comes to the point I made earlier about the flexibility and the control that we have across all elements of our business.
The work we do to make sure that we are robust and resilient as a small producer, and manage the business appropriately.
Thank you. Now I've got a couple from investors. Adam W. on a bit of a roll this morning. He says, "There's been nearly 50% dilution in the past four years. Do you foresee another 50% dilution in the next four years?
Thanks for the question, Adam. I think you're referring to the transactions, if you go back four or five years. We've issued some shares to Craig Mitchell for the purchase of the 50% of the Newhaul joint venture and the purchase of the entire Newhaul business that now sits as the base of our Fenix logistics function. We also issued some shares to Mount Gibson to acquire the port facilities, the loading facilities that you see behind me, as well as the rail siding that is absolutely crucial to our plans to get 10 million tonnes at Ruvidini, the rail siding at Perenjori, and very importantly, the Shine Iron Ore Mine. Yes, we have issued those shares. I wouldn't say those shares are dilutive. Any economic analysis would show that they were incredibly value-creative equity distributions. At the moment, though, we're inwardly focused.
There was a question earlier about how we're planning to finance the expansion to 10 million tons. In answer to that, I didn't, for example, say, "Well, we'll raise equity at the appropriate time." There's every chance that we don't need to raise equity to fully finance that scoping study, or the definitive feasibility study, when that's ready. When we published the scoping study, it has roughly an AUD 500 million capital requirement. We estimated conservatively that before we require that quantum of funds, that we believe we can generate AUD 200 million through our operations. Therefore, there's currently a funding requirement of AUD 300 million. I mentioned earlier that there's strong confidence that we can find debt solutions and partner solutions to fund that amount.
in defending the equity that we've issued over the four years, because it's actually been intrinsic, Adam, in building the business that you now look at. A business that's producing 4.5 million tons a year, will ramp up to 6 million tons over the next two years, and has an asset base that's capable of producing more than 10 million tons. That would not have been possible if we didn't own all of the assets that we had to acquire through those equity issues. at this stage, there are no plans to issue further equity.
Great. Good point. The final one, it's a nice one from Adam to finish off. Looking long term, where do you see the business in 10-15 years' time?
Well, we've got a dividend policy that commits the board to look to paying a full year dividend to shareholders based on our net profit after tax and available franking credits. The very exciting thing, and you don't have to wait 10 or 15 years, Adam. Fast-forward 4 or 5 years, 10 million tons a year, plug in whatever iron ore price you want to, and look at the margin we'll be making off of AUD 55 C1 cash cost. You can see that this business can pay dividends, not in the single cents, but in the AUD 0.10, AUD 0.20 fully franked going forward. That's where I see this business. We have a vision which is to produce 10 million tons a year for the Weld Range very efficiently in the bottom half of the global cost curve.
That's where I see this business in five years, and that's going to be very rewarding for Fenix shareholders.
Fantastic. Thank you, John. Look, any closing comments from you?
Thanks very much for everyone's interest. Again, congratulations to all of our team across our mining business, across our haulage business, our port business, and anywhere that you're working for Fenix. This was a really challenging quarter, and your work and commitment is really inspiring to myself and the board. Again, I would encourage shareholders if you've got a question, if you'd like to understand more about the business, please reach out. We love talking to shareholders and particularly interested in your feedback and your ideas. To everyone else, stay tuned for what is going to be a strong end to the 2026 financial year for Fenix, and stay tuned for further news from us.
Fantastic. Look, that concludes the seminar. Thank you, John. Thanks for joining us, and enjoy your weekend.
Thanks, Mick.