The Fenix share price (ASX: FEX) has been rising from the ashes since March, with more than 40% of that gained this month. Here’s why.
The post Why the Fenix (ASX:FEX) share price surged 40% in December, and up 1,000% since March appeared first on The Motley Fool Australia. –
Iron ore producer Fenix Resources Ltd (ASX: FEX) share price has continued its rise, up 14% today amid a broader lift in ASX mining shares. This comes as iron ore price continues its rise to US$156 per tonne as of today.
Moreover, the Fenix share price has increased 1,000% since March, with more than 40% of that gained just this month.
At the time of writing, shares in the miner are trading at 23 cents, up by 2.5 cents.
Why has the Fenix share price risen by 1,000% since March
The Fenix share price has gained ground along with the rise in the iron ore price.
In November 2019, Fenix released a feasibility study which forecast potential earnings from the 1.25 million tonnes annual production expected out of its Iron Ridge project in WA.
At that time, it predicted an annual earnings before interest, tax, depreciation, and ammortisation (EBITDA) of $16.4 million, based on a projected Australian dollar iron ore price of just $111.43 a tonne.
The iron ore price has since risen to almost US$156 per tonne today, and at this price, Fenix’s projected EDITDA would be closer to $100 million a year.
This bodes well for a project where the capital expenditure was just $11.9 million. The break-even price for Iron Ridge is only about $US70 a tonne, and the mine also has some of Australia’s highest grade iron ore.
The company has also made some strategic partnerships in preparation for its first sales in early 2021.
In October, Fenix announced a sales agreement with Chinese heavyweight Sinosteel. That agreement would cover the sale of half of the production from Iron Ridge, adding to the company’s existing marketing agreement with Atlas Iron.
The biggest cost for Fenix is hauling iron ore 490km by road to Geraldton port, where there is a dedicated iron ore ship loader. Last week, Finex signed binding port access and lease agreements with Mid West Ports Authority (MWPA), which operates the Port of Geraldton. That agreement has secured for Fenix a port allocation of 1.25 million tonnes per annum of iron ore, to be exported utilising the port’s Berth 5 ship loader.
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Motley Fool contributor Eddy Sunarto 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.