The Fenix Resources Ltd (ASX: FEX) share price is sinking today, despite the company announcing a ramp-up in production. At the time of writing, Fenix shares are down 2.19% for the day.
The company is hoping to emerge as Western Australia’s next significant iron ore producer and has advanced quickly from project construction back in August 2020 to its maiden shipment on 15 February 2021.
Fenix share price sinks on production ramp-up
Fenix has been focused on ramping up the production of its 100% owned flagship Iron Ridge iron ore project. Today, the company announced that road haulage rates from the Iron Ridge mine to the port storage facility have reached nameplate levels of 1.25 million tones per annum (Mtpa).
The update notes that Fenix is now able to schedule two bulk shipments of approximately 60,000 wet metric tonnes (wmt) per month for the foreseeable future. This milestone was achieved approximately one month ahead of the company’s schedule.
Managing director Rob Brierley congratulated the Fenix team on its successful journey from explorer to producer.
I’m proud of the achievements of the Fenix team, in collaboration with our keys service providers Fenix-Newhaul, MACA Mining, Alpha and Champion Bay Electrical. We have built a sustainable iron ore export business in a short space of time and have done so with due respect for the heritage value of the area around Iron Ridge, the environment and the health and well-being of our people.
How does Fenix’s production stack up in the iron ore space?
Fenix and its Iron Ridge project are in its early days, but the company’s nameplate capacity is significant when compared to existing ASX-listed iron ore producers.
Mount Gibson Iron Ltd (ASX: MGX) for example, boasts a market capitalisation of $1 billion with 2.35 million wet metric tonnes (Mwmt) mined in FY20. Mount Gibson is also ramping up production with its half-year results highlighting 1.4 Mwmt mined for the half year ended 31 December.
This towers over Fenix which currently has a market capitalisation of just $113 million with its 1.25 Mpta nameplate capacity and capacity to schedule two bulk shipments of ~60,000 wmt per month for the foreseeable future. If things go to plan, Fenix could be shipping an annualised 1.44 Mwmt per annum despite fetching just one-tenth of Mount Gibson’s valuation.
That said, Fenix is in its early days without a history of production excellence. It is positive to see that in the company’s quarterly activities report on 20 January 2021, it highlights sales agreements in place for 100% of projected iron production from Iron Ridge.
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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