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Monsters of Rock: Sure you’ve heard of Fortescue, but which three small iron ore miners also posted strong results today?
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- Iron ore mid-tiers Champion Iron, Grange Resources and Fenix Resources all roll out improved results for the December Quarter
- Materials index around break even point as week draws to a close
Results for the big three in Australian iron ore are now in, with more positives than negatives coming out of the powerhouse stables of Rio Tinto (ASX:RIO), BHP (ASX:BHP) and Fortescue Metals Group (ASX:FMG).
Expect those to translate into a profitable set of half year earnings reports and strong dividends yet again, although capex, M & A and decarbonisation spend could begin to eat into shareholder returns.
But outside of the major names there are others enjoying iron ore’s return to bull territory, with the headline Australian bulk metal up more than 50% since its most recent bottom in late October to over US$120/t.
That has delivered strong results for the emerging mid-tier and juniors, three of them reporting today.
Fenix Resources (ASX:FEX)
Like FMG, Fenix Resources was able to buck the trend across the mining industry of escalating costs in the December quarter, cutting its FOB C1 cash costs from $84.14/t to $77.76/wmt.
On the US dollar basis favoured by the major miners that’s down from US$58/wmt to US$51/wmt, helped by an easing in shipping costs from US$26.6/dmt to US$21.7/dmt.
Fenix shipped 298,439wmt across five shipments consisting of 132,775wmt of lump and 165,664dmt of fines.
Lump iron ore typically garners a premium on the more traditional fines product because it does not need to be sintered, provided efficiency and emissions benefits to the steelmaking customer. Those tonnes shipped at an average CFR price of US$101/dmt or $154 Aussie, slightly less than the September quarter’s US$105/t.
But excluding quotation adjustment and a hedgebook that will see 50,000t delivered per month at $173/t to June 2023, Fenix’s operating margin lifted 46% from $26/dmt to $38/dmt in the December quarter, with an additional $6.8m paid into the hedges.
FEX saw its cash balance drop from $94.5m at the end of September to $48.8m at December 31, but that included $22m in tax payments and $28m in dividends, and did not include an $8.2m shipment which left on Christmas Day and was paid for in January.
John Welborn-chaired FEX has sold over 2Mt of iron ore from its Iron Ridge mine in the Midwest since opening in early 2021.
Fenix Resources (ASX:FEX) share price today:
Grange Resources (ASX:GRR)
Grange was one of the ASX’s top yielding dividend paying stocks in 2022, and tends to do perform than any other relative to its size when the market runs hot.
That is because of the massive premium it gets for the DR grade pellets sold from its long-running Savage River magnetite mine in Tasmania.
GRR is already up over 28% YTD, with realised prices in the December quarter of US$122.87/t FOB Port Latta, or $189.61/t Aussie, on pellet sales of 699,000t, up from 547,000t in September. Concentrate production rose from 655,000t to 668,000t.
That compared favourably to US$95.17/t ($140.84/t) in the September quarter, and came as unit cash costs fell from $130.69/t to $124.39/t thanks to an easing in energy costs.
Grange finished the quarter with cash and liquid investments of $298.61m and trade receivables of $48.73m, compared to $326.74m cash and liquid investments and $15.56m trade payables in the September term.
CEO Honglin Zhao said demand for high grade pellets, hurt by margin pressure at Chinese steel mills in 2022, was improving.
“We have also started to see energy costs coming down from historic highs. Despite the many challenges that presented over the past year, the Company continued to operate in a disciplined manner with a strong focus on productivity and cost control” Zhao said.
“We are continuing to complete the optimisation and definitive feasibility studies on the Southdown Magnetite Project and the Underground transition at the Savage River North Pit mine. These two significant projects are planned to be completed and the results released in the upcoming months.”
Grange Resources (ASX:GRR) share price today:
Champion Iron (ASX:CIA)
One of the few genuine growth stocks in the iron ore space, Champion Iron is starting to see the benefits of a major expansion at its Bloom Lake mine in Canada.
The company completed an expansion last year to increase capacity at its high grade magnetite deposit in Canada from 7.5Mtpa to 15Mtpa.
It hit commercial production in the December quarter, producing a record 2.9625Mt of 66% Fe iron ore concentrate.
Champion Iron, which reports in Canadian dollars, banked C$351.2m in revenue, up from C$253m in the same period 12 months earlier, but saw net cash flow from operating activities drop to C$13.4m from C$104.6m in 2021 with start up costs for its Phase 2 expansion included.
EBITDA of C$118.2m was relatively unchanged from C$122.1m in December 2021, with net income of C$51.4m (earnings per share of 10c), down 24% from C$68m a year earlier.
Its gross average realised selling price was down 12% to US$125.5/dmt (C$171.6) from US$154.8/dmt (C$195) a year earlier, with C1 cash costs up 28% from C$59.5/t to C$76/t.
CIA has also floated the possibility of transitioning into the supply of direct reduced iron plants, known for producing iron ore at a lower CO2 intensity than conventional blast furnaces, a technology expected to make up a growing share of the steel market as net zero efforts intensify.
A feasibility study delivered an after tax NPV of C$738.2m, with an IRR of 24% on capex of C$470.7m and 30 month build time to convert about 7.5Mtpa of production each year into 69% Fe DR grade pellets.
Champion Iron (ASX:CIA) share price today:
Miners in mild finish to week
Coal stocks fell hard while the materials sector looked to be heading to an almost breakeven position as the curtain closed on a week of results and interrupted trade.
New Hope Corporation (ASX:NHC) sunk 9.03%, Whitehaven Coal (ASX:WHC) dropped 6.58% and Yancoal (ASX:YAL) was off 9.39%, with Terracom (ASX:TER) also down 4.95% at 4pm AEDT.
A variety of things are impacting the coal market, with a milder than expected European winter reducing demand for energy, sending Newcastle coal futures for February down in recent days to around US$260/t. Spot is trading for around US$350/t.
Reports overnight by Reuters also suggested there could be a major ramp up of coal exports out of Indonesia, which could hit 500Mt in 2023.
The iron ore majors were all in the green, but saw their gains fade toward the end of the trading day, with BlueScope Steel (ASX:BSL), Liontown Resources (ASX:LTR) and Lake Resources (ASX:LKE) all among the top large and mid cap performers.
