Fenix Resources Limited

Welcome to today's Fenix Investor Webinar. My name is Mick Collis and it's my pleasure to be your host this morning. Now as you're aware, yesterday, Wednesday the 25th of February, Fenix published its half-year results and joining me today to discuss the announcement and to answer any questions is Fenix Executive Chairman, Mr John Wellborn and Chief Financial Officer, Chris Hunt. But just before I do pass over to John for some introductory comments, I'll just quickly run through the way this will work. So this is a live webinar being held via Automics online meeting platform which lets shareholders and investors not only participate in the webinar but also ask questions in real time. If that's something you would like to do, just simply press on the Q&A icon at the bottom right of your screen. That will open a new screen, and at the bottom of that screen, there's a section for you to type your question. And once you have, just hit Enter on your keyboard, and that will send the question through. If we get lots of similar questions on one topic, I won't ask them all because we want to try and cover as many topics as possible. And if we run out of time, John will answer them in due course via email. and you can type your questions at any stage. So if there is something you want to know, today is a great chance to find out. But to get us started, I'm going to pass over to Fenix's Executive Chairman, Mr John Welbourne, for some introductory comments on the half-yearly report. John, over to you.

Thank you, Nick, and congratulations on acting from the new Phoenix Media Centre. You look very bright and shiny this morning, and welcome to shareholders and great to have Phoenix's Chief Financial Officer, Chris Hunt, joining me on this webinar to cover what is another impressive and a great announcement from Fenix as we headlined it, record production and earnings. Shareholders will recall that our main target during 2025, the calendar year, was to achieve a run rate of 4 million tonnes per annum. And it's not that long ago that that was a very ambitious target for Fenix as a one-mine producer, Iron Ridge at 1.3 originally and then 1.5 million tonnes per annum. So the headline number of the half year, the six months to 30th of December, 31 December 2025, was that we produced record production of 2.127 million tonnes. And that is a great demonstration that we achieved that target of 4 million tonne run rate. In fact, if you annualise that, we're obviously... at four and a quarter million tonnes, and we're running it even more now. Obviously, the half year speaks for itself. Revenue went up by 125% on the back of increased production and strong iron ore prices. EBITDA increased by 137%. Net profit after tax by 419%. As a result of that, you can see that we've materially strengthened the balance sheet. Most importantly, outside of the finance numbers that Chris will talk to, it's important to remember that during this six-month period, we executed a game-changing transformational 30-year right-to-mine agreement on the World Range Project. So we now control 300 million tonnes of high-grade direct shipping oil, and that's a very important support for what this half-year validates. which is the strength in our integrated supply chain. We have a very well-performing, strong team in our mining business. We have a fantastic, wholly-owned Fenix logistics business in Horlidge. And we have... amazing port assets and a port services team, and they're operating in a fully integrated model that represents all of the revenue and all of the earnings numbers that Chris is about to go through, a response of mining iron ore, hauling it to the port, storing it, loading it into boats and sending it to our customers and being a very important part of the global steel industry. And we're really excited about the opportunities that the... Finance numbers demonstrate the platform we have. Our strategy has always been clear. Acquire very high quality, high grade direct shipping or assets. Integrate our logistics and operate an integrated supply chain. We've been scaling production incrementally and we plan for that to continue. Most obviously through the incredibly exciting scoping study we published at the end of this six month period. reminding the market that this had a net present value of AU$3 billion. We're reinvesting the cash flows we're generating into long-life growth. We're committed to rewarding our shareholders with a dividend policy, and we've been able to manage both the reinvestment into building a bigger business and looking to reward our shareholders. And hopefully, if you look at the forward cash flows, there's strong predictions that that can be quite significant value in the future. The half-year numbers prove that our strategy is working, and the board's particularly encouraged that half-year NPEP has already exceeded the full-year net profit after tax in the previous financial year, so the 12 months to 30 June 2025. The six-month period to December 2025, we've already exceeded it by more than 80%. And from an earnings before depreciation and tax, the half is almost equivalent to the full year FY25 numbers. So we're growing the business. Our strategies are working. Although I've mentioned that we are investing and we are focused on incremental growth, this six-month period is actually all about structural growth, game-changing support. We now have decades of future iron ore under us. We've got a great business. I'll now with great pleasure pass across to Fenix's Chief Financial Officer Chris Hunt to talk about the financials in a bit more detail.

Thanks, John. Appreciate it. And it's great to be discussing the half-year financial results with everyone today, which I think really sets us up for a strong position in the run home to 30 June 2026. In terms of the financial metrics which John's discussed, just quickly I won't labour on them too long because I think John's very succinctly summarised them. Revenue's up, EBITDA's up, MPAT's up. operating cash flows up, which has resulted in an increasing closing cash position of nearly $80 million. I think, you know, to me what this clearly demonstrates for this business is the benefit of increased tonnages in a bulk commodity industry such as Fenex, with every additional tonne that we ship being profitable. So it's really simple. Every tonne we do, more tonnes equals increased earnings equals increased cash flow. So we need to continue increasing our volumes, which we aim to do, and as John's articulated earlier in terms of our strategy going forward. With three mines now operating at steady state, and it's really great that Beaven's ramped up so quickly, and we've got production over 4 million tonnes per annum. Certainly the working capital requirements for the group have grown, and that's clearly noted by at 30 June we had no outstanding trade debtors. At 31 December we had just under $20 million worth of trade debtors outstanding for shipments that were received very early in January. But clearly this shows that the working capital of the group, requirements of the group, is growing. So what we did during the half is that we looked at doing some really cost effective low interest rate iron ore prepayments with certain offtakers and that's helped us to manage our working capital requirements. And certainly as we've grown into our third mine or our third mine started, that ramp up does use up a lot of working capital until we're at steady state, which we are now, which is pleasing. But it also helped us, the iron ore prepayments also helped us fund 20 million, 290 million tonne right to mine payment with cyano steel, which is clearly a long term investment for this business for the next 20 or 30 years. But we needed to fund it so we used iron ore prepayments. So going forward, iron ore prepayments have decreased for us. We've reduced our reliance on them because we are where I'm looking at and we're progressing more longer term finance, two to three years. and that is appropriate for this business, sort of longer-term tenant finance is more appropriate as we need to fund our scale-up in the world range and our business to 10 million tonnes or prior to 10 million tonnes. It gives us longer-term finance, gives us a lot more flexibility going forward in terms of the amount, timing and the actual use of those funds. So that's progressing. The financing for the world range, which is subject to a board decision and subject to FIT, will be progressed later this year. We've certainly had discussions with financiers, but it will be progressed later this year when we complete a feasibility study. But the financing we're looking at now is more two to three years more short-term, but longer-term than the iron ore prepayments. In terms of C1 cash costs, really pleasing that we've hit the midpoint of the guidance of $75 per wet metric tonne. which year on year or half on half is a 7% decrease. And again, it's no surprise that with a commodity, bulk commodity business, the more tonnes we do, the lower our unit rates go because we spread the fixed costs over a lower base. So we're seeing that benefit. What's interesting when I look back on this business, at 31 December 2023, C1 cash costs were $84. So 31 December 23, project to date, $84. Currently we're at $75. So that's a combination, which is an 11% reduction. That's a combination of good cost discipline, which we've got to be continually vigilant on, and also, again, to reiterate, increased volumes lower our unit rates. That is why we're scaling up, or one of the reasons why we're scaling up, or one of the benefits. Capital expenditure for the half was $40 million, just under $40 million, The primary payment there being the $20 million plus $2 million in transaction costs for the right to mine transaction. Again, it's a payment that's happened in a half, but this expenditure, as John has mentioned earlier, completely transforms this business from a short-term iron ore producer to a long-life iron ore producer. and really sets us up to further reduce our operating costs. So that expenditure, even though we don't see the benefits of it today, we will be seeing the benefits over the next 20 or 30 years. We also just had under $10 million in CapEx for Beavan W11, which is predominantly the final payments in relation to the 18km private haul road. And then there was some capex for logistics capital as well as we do the ramp up to 4 million tonnes. So that sort of brings you around to that just under $40 million. In terms of our haulage fleet, as we've ramped up to that 4 million tonnes, we've significantly ramped up our haulage fleet assets. And you'll note that on our balance sheet at cost, we have just over $100 million worth of haulage fleet assets. We have actually been aggressively repaying these since we started purchasing trucks and trailers. Over four years we repay this asset over. Typically in the industry you'd probably see five to six years, but given we've got the cash flows available, we've continued to aggressively repay this fleet. and that's actually built up an equity position of just over $35 million in those trucks and trailers, which we're not looking to realise or anything like that, but while we've got the cash, we're building up this really strong balance sheet, so I think that's important to know. In terms of CapEx going forward, we have been and we will always continue to look at CapEx on a very disciplined basis. But we are changing somewhat. So again, Fenix used to be a short-term mine life producer. We're now clearly around for a long, long time. So when we think about capital and making capital decisions... We really look at that long-term nature and predominantly if that capital can reduce C1 cash costs or all-in costs, it is something that we're very interested in doing is spending that capital to lower that C1 cash cost. So that's how we think about capital going forward, but it continues to be on a disciplined basis. With respect to hedging, people know that we've certainly taken advantage of the market and we've actually got a really strong hedge position now, probably the longest I think this company's ever been out in terms of tenor. We're out to 30 June 2027 and we've got 1.3 million tonnes hedged from 1 January. That's decreased a bit now. We're sitting here towards the back end of February at $151. So it's a really strong position in terms of our iron ore swaps. We'll continue to take advantage of the market when these opportunities present and continue to hedge in an appropriate way. Certainly note that since Johnny's New Year has ended, the trading started again and the iron ore price has started to increase, which is fantastic. And we've also, in the half, purchased just over $100 million US in AUD call options. And the reason we're doing that is because we're protecting surplus US dollar revenue from a rising Australian dollar price. and we're purchasing call options which are low cost and we've got an effective rate of just under 73 cents Australian dollar for every US dollar. We're doing that because purchasing the call options is like insurance. If the exchange rate decides to decrease or goes down to under 72 cents, it goes down to 65 cents, 64 cents, then we still benefit on that. We get that full benefit of that rate. But the worst rate or the highest rate that we can pay on these AED call options is just under 73 cents. And that's a really good rate for us. We're very profitable at that level. So we're very comfortable to be purchasing AED call options at this rate. And we've extended it out to June 27th. So what you can see is that we're really locking in. We've still got some upside. We've certainly still got some upside. But we're really starting to lock away FY27 in terms of our profitability with our hedging and they're very, very good rates and we're very profitable at those levels. So I think, you know, in summary, clearly a very, very strong half, really pleasing to see the supply chain and the ramp-up of our production to over that 4 million tonne run rate. And again, as I said in my opening remarks, it sets us up really well for this half and the run home to 30 June 2026. Thank you. Over to you, John.