FENIX RESOURCES LTD — Interim / Quarterly Report 2022

Jan 20, 2022

December 2021 Quarterly Activities Report

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21 January 2022

Fenix ships record ~357,000t from Iron Ridge

Highlights

• Six shipments totalling 356,710 wet metric tonnes (wmt) of iron ore from the Iron Ridge Project in Western Australia were sold during the December 2021 Quarter, consisting of 188,391 wmt of lump and 168,319 wmt of fines

• Average price received was US$55.96 (~A$77) per dry metric tonne (dmt) FOB, which is equivalent to US$89.50/dmt (~A$123/dmt) CFR. Received prices were adversely impacted by quotation period price adjustments from the previous quarter that amounted to US$4.6m or US$13.48/dmt (~A$19/dmt)

• C1 FOB cash costs for the quarter were A$94.09/wmt shipped

• Cash and receivables as at 31 December 2021 of A$60.8m which consisted of cash of A$54.9m and a receivable of $5.9m (US$4.2m) relating to a shipment dispatched in late December 2021 but paid for in early January 2022; Cash balance is after deducting $24.1m in dividend payments made in the quarter

• Fenix commenced delivering into hedge contracts from October 2021 at the rate of 50,000t a month for 12 months and at a fixed price of A$230.30/dmt. Cash settlement under the hedge contracts occurs 10 days after the end of each month with a total of approximately A$8m received for the two contracts (October and November) settled during the quarter.

• Stronger March 2022 quarter anticipated due to recent rises in iron ore price, reduced freight rates and high likelihood of quotation period adjustments

• John Welborn appointed as Non-Executive Chairman

• Fenix will hold a conference call for analysts today at 8am WST (11am EST). Investors can listen to the call live

https://webcast1.boardroom.media/watch_broadcast.php?id=61e65df4dd818

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au

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Fenix Resources Limited (ASX: FEX) is pleased to report on its activities during the December 2021 quarter, in which the Company shipped a record 357,000 tonnes of high-quality iron ore from its Iron Ridge project in Western Australia’s Mid West.

Fenix Managing Director Rob Brierley said: “We generated an outstanding production performance which unfortunately was accompanied by lower iron ore prices and higher ocean freight costs. Pricing adjustments from the September 2021 quarter also impacted cashflows.

“However, we have stayed the course with our mine plan and continued to accelerate waste stripping to ensure we have orderly access to high grade ore sources, with the benefits of this strategy to be yielded in the June 2022 quarter and beyond.

“The current quarter has started positively with higher iron ore prices and lower freight rates, and the high likelihood that pricing adjustments will result in cash inflows.

“We finished the quarter with a strong balance sheet with net cash of A$54.9m, equal to 11.0c a share, and expect to build on this solid position during the second half of the financial year.”

Iron Ridge Project - Operations

Health & Safety

Fenix is committed to maintaining a safe work environment for all personnel. As at the end of the quarter ending 31 December 2021 (December Quarter) the Company’s Iron Ridge mining operations and the Company’s Geraldton Port operations have been Lost Time Injury (LTI) free since inception.

Fenix continues to manage strict COVID-19 protocols at all operational sites to protect the health, safety and wellbeing of the Company’s people. To date, the Company has not been materially affected by any COVID-19 related restrictions including the interstate border closures.

Fenix has taken steps to ensure the Company complies with the mandatory vaccination requirements of the Western Australian government. Fenix personnel have responded positively to changing circumstances throughout the pandemic and no instances of COVID19 have been reported at any Fenix workplaces to date. The Company stands ready to respond promptly to further government regulations and the changing COVID-19 environment to ensure operational continuity.

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au

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Mining and Production

Production Summary

Production Summary	Dec Q FY22	Sept Q FY22	June Q FY21	Project to
(kwmt)				Date
Ore Mined	277.9	335.2	369.6	1300.5
Lump Ore Produced	122.7	204.5	196.4	649.6
Fine Ore Produced	153.3	173.7	161.3	618.3
Lump Ore Hauled	165.4	195.6	154.1	628.3
Fine Ore Hauled	166.4	149.4	154.1	585.7
Lump Ore Shipped	188.4	197.8	129.3	628.3
Fine Ore Shipped	168.3	143.4	151.4	570.3
C1 Cash Cost	94.1	86.8	85.3	89.8
(A$/wmt Shipped FOB)

Performance at a Glance

Item	Unit	Dec Q FY22	Sept Q FY22	June Q FY21
Lump product sales	k wmt	188	198	129
Finesproduct sales	k wmt	168	143	151
Total Ore Sales	k wmt	357	341	281
Platts 62% Fe CFR price,	US$/dmt	109.6	162.9	200.0
**average **
Average Realised FOB price	US$/dmt	56.0	129.2	185.2
Average Freight cost	US$/dmt	33.5	34.4	30.4

During the December Quarter, Fenix loaded six ships with a total of 356,710 wmt or iron ore from Iron Ridge (188,391 wmt of lump and 168,319 wmt of fines),) with completion dates of 7 October, 25 October, 8 November, 24 November, 16 December, and 28 December 2021.

To date, Fenix has shipped 1,198,573 tonnes of product from its Iron Ridge Project.

Average grade shipped for the December Quarter was 61.6% Fe for fines (previous quarter: 62.2%) and 64.4% Fe for lump product (previous quarter: 64.8%), further displaying the unique high-grade nature of the Iron Ridge deposit.

The current project-to-date lump to fines ratio of 51%:49% continues to be significantly higher than the life-of-mine assumed average of 25%:75%. As expected, the trend in the latter part of the Quarter moved closer to previously assumed levels as the planned pit deepens (December 32%:68%).

Waste stripping at the Iron Ridge mine is currently elevated as the Stage 2 cutback continues. Both of these items were in-line with guidance provided in the September Quarterly report. The strip ratio is expected to revert to the life-of-mine average of 2.8 during the June 2022 quarter.

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au

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Fenix’s Iron Ridge Iron Ore Mine, December 2021

Fenix Newhaul Haulage Joint Venture

Fenix Newhaul is a 50:50 joint venture transport company established by Fenix Resources Limited and Newhaul Pty Ltd in October 2020 (see ASX Announcement dated 26 October 2020). Fenix-Newhaul provides bulk haulage transport of the Company’s high-grade iron ore products from the Iron Ridge Project near Cue 486km to the Fenix’s loading facilities at Geraldton Port.

Fenix-Newhaul commenced haulage operations in December 2020 and had performed and grown strongly. The strategic joint venture approach to the Company’s haulage operations represents a significant competitive advantage to Fenix.

During the December Quarter, 331,000 tonnes of iron ore were hauled by Fenix Newhaul closely aligned to budget levels of approximately 110,000 tonnes per month.

Fenix Newhaul successfully trailed and is now rolling out a new four trailer combination (pictured below) which will increase haulage capacity to approximately 140 tonnes per truck and will result in future cost savings. Currently there are 25 truck and trailer combinations in the Fenix Newhaul fleet, 13 of which are four trailer combinations.

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au

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Fenix Newhaul 140 tonne truck and trailer combination

Financial Performance

Net operating cash outflow for the December Quarter was $11.1m (Sept Q: cash inflow of $25.4m). Unaudited operating margins averaged minus A$26/wmt FOB for the period (Sept Q: $73/wmt FOB).

Capital expenditure for the December quarter was $3.5m, taking the total project capital expenditure to date to $20.2m. The majority of the capital expenditure for the quarter related to the purchase of three new front end loaders, which have been deployed to conduct shiploading through a newly formed local Indigenous business and will translate into port cost savings. Fenix expects capex to be less than $1m in the March 2022 quarter as the final site infrastructure is completed by the mining contractor.

Unaudited C1 Cash Costs for the December Quarter were A$94.09 per wmt shipped, approximately 7% higher than the previous quarter due to increased fuel prices, contract cost escalation and the temporarily elevated strip ratio at the mine. The planned higher strip ratio will continue in March 2022 Quarter before normalising thereafter.

Project costs to date are A$89.81/wmt, equivalent to approximately US$64/wmt based on prevailing FX rates. These costs are inclusive of marketing fees and costs incurred in the ramp up period in late 2020 and the early months of 2021.

Sea freight costs remained at elevated levels during the quarter despite the decline in iron ore prices. However, there were positive signs that freight costs were normalising to levels of approximately US$24-28/wmt by December 2021 after hovering close to US$40/wmt for most of November 2021.

Marketing fees and royalties decreased due to lower FOB iron ore prices received.

Cash at the end of the period was $54.9m. Fenix has no bank debt. This represents a net cash backing of 11.0 cents per share.

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au

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Exploration

Fenix executed a farm-in and joint venture agreement with Scorpion Minerals Limited (ASX:SCN) in February 2021 over 33,954 hectares of tenements held by Scorpion adjoining the Company’s Iron Ridge operations (see ASX Announcement dated 8 February 2021).

Field work on the Scorpion farm-in tenements commenced during the December Quarter with an extensive Heritage Survey conducted over areas prospective for iron ore mineralisation. Several target areas have been identified within close proximity to the Company’s existing operations which justify exploration for potential high grade iron mineralisation similar to Iron Ridge.

All required clearances have now been received over the Scorpion farm-in tenements and the Company is reviewing data and conducting ground truthing prior to finalising a potential first-pass drilling program.

Corporate

Dividend Payment

Fenix has adopted a dividend policy of distributing between 50% and 80% of after-tax profits as fully franked dividends, subject to the availability of franking credits.

In September 2021, the Company declared a fully franked dividend of 5.25c per share after announcing a $49.0m after-tax profit for FY21. The dividend was paid on 5 October 2021 resulting in a cash outflow of $24.1m.

At present Fenix does not have any franking credits available, and consequently is not considering declaring an interim dividend. A decision of a full year dividend for the current financial year will be made in September subject to the Company’s policy.

Board

During the December Quarter, John Welborn was appointed as an independent NonExecutive Director and Chairman of Fenix. Mr Welborn’s appointment followed the resignations of Mr Warwick Davies as Interim Non-Executive Chairman and Mr Richard Nicholls-Maltman as a Non-Executive Director. Subject to Shareholder approval Mr Welborn has subscribed for 10 million shares in the Company subject to a Shareholder approved Share Loan Plan. Mr Welborn has also been appointed as the Fenix representative on the Fenix Newhaul Pty Ltd Board effective 29 November 2021.

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au

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Hedging

On 22 July 2021, Fenix entered into swap arrangements with an Australian top tier financial institution for 50,000 tonnes of iron ore per month based on the Monthly Average Platts TSI 62 Index converted to AUD for the 12-month period from October 2021 to September 2022. The price fixed is equivalent to A$230.30/dmt, flat over the period.

As at 31 December 2021, Fenix’s hedge book had a marked-to-market value of approximately $33.49m, inclusive of the outstanding settlement for the month of December 2021 that was paid subsequent to the end of the quarter.

Capital Structure

During the December Quarter, the Company issued a total of 30,000,000 fully paid ordinary shares in the capital of the Company upon conversion of the Class B Performance Shares following the shipment and sale of one million dmt of iron ore from Iron Ridge (refer ASX announcement dated 1 December 2021).

In accordance with ASX Listing Rule 5.3.5, $196,043 of payments were made to related parties or their associates during the quarter, comprising Executive Director salaries, Non-executive Director fees and superannuation.

Business Development

During the December Quarter, the Company commenced a comprehensive business review to confirm and optimise current operational strategy and evaluate synergistic growth opportunities.

As a new Western Australian Mid-West based producer of high-quality high-grade iron ore with existing mining operations, an operational transport joint-venture, and Company owned export facilities at Geraldton Port, Fenix is actively exploring and seeking to evaluate new regional opportunities for exploration, development, and production. The Company is seeking to establish a clear Business Development strategy with a rigorous framework approach to evaluating and progressing any new opportunities to ensure they are synergistic, consistent with the Company’s strengths, and will add to Shareholder value.

Authorised by the Board of Fenix Resources Limited.

For further information, contact:

Rob Brierley Managing Director Fenix Resources Limited

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au

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About Fenix Resources

Fenix Resources is an ASX-listed, West Australian based high-grade iron ore miner currently producing ~1.25 million tonnes of iron ore per annum.

The Company has mined and shipped more than 1 million tonnes of ore at a grade above 63% Fe from its 100% owned flagship Iron Ridge Iron Ore Project. Iron Ridge is a premium Direct Shipping Ore (DSO) deposit which hosts a JORC 2012 compliant resource which is located 486km by road from Geraldton port. Production commenced in December 2020 and first sales were generated in February 2021.

Fenix’s produces high-grade high-quality iron ore products which attract a premium price on the seaborne market. Global customers are demanding higher grade ore to reduce the environmental impact and meet the lower emission targets set by increasingly strict government regulations.

The Company hauls iron ore from Iron Ridge to Geraldton Port using a joint-venture company, Fenix Newhaul Pty Ltd. Export capacity has been secured at Geraldton through binding agreements with the Mid West Ports Authority for the use of its facilities. At Geraldton Port, Fenix owns its own iron ore storage shed, truck unloading and conveyor systems.

Product sales are conducted 50% through an offtake arrangement with Sinosteel International Holding Company Limited and 50% through an exclusive marketing agreement with Atlas Iron Pty Ltd. The Company has protected its margins with a hedge book which consists of 50,000 tonnes per month at a price A$230 per dry metric tonne through to September 2022.

The Company has adopted a dividend policy which provides that, to the extent that dividends can be fully franked, Fenix will distribute between 50% and 80% of after-tax earnings to shareholders in the form of dividends.

Fenix has generated some 170 full time equivalent jobs and the Company is focussed on promoting opportunities for local businesses and the community.

The Project’s Mineral Resource, announced on 21 August 2019 and updated on 15 September 2021, is categorised into Indicated and Inferred Mineral Resources as shown in Table A.

Classification	Tonnes Mt	Fe %	Al2O3	LOI %	P %	SiO2 %	TiO2 %
Indicated	9.4	64.5	2.45	1.85	0.05	3.11	0.09
Inferred	0.4	62.1	2.74	3.70	0.05	4.52	0.11
Total	9.8	64.4	2.46	1.92	0.05	3.16	0.09

Table A: Iron Ridge Mineral Resource Estimate reported above a 58% Fe cut-off grade.

The Project’s Ore Reserves as announced on 4 November 2019 and updated on 15 September 2021 are categorised is shown in Table B.

Classification	Tonnes Mt	Fe %	Al2O3	LOI %	P %	SiO2 %	TiO2 %
Probable	7.10	64.09	2.67	1.96	0.05	3.35	0.09
Total Ore	7.10	64.09	2.67	1.96	0.05	3.35	0.09
Reserves

Table B: Iron Ridge Ore Reserves

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au

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Competent Person Statements

The information in this report that relates to Mineral Resources is based on information compiled by Mr Alex Whishaw, a Competent Person who is a Member of the Australasian Institute of Mining and Metallurgy and is a former employee of CSA Global Pty Ltd. Mr Whishaw has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves (JORC Code). The Company confirms it is not aware of any new information or data that materially affects the information included in the relevant market announcement and all material assumptions and technical parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially changed.

The information in this report that relates to the Processing and Metallurgy for the Iron Ridge Project is based on and fairly represents, information and supporting documentation compiled by Mr Damian Connelly who is a Fellow of the Australasian Institute of Mining and Metallurgy and a full-time employee of METS Engineering Group. Mr Connelly has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. The Company confirms it is not aware of any new information or data that materially affects the information included in the relevant market announcement and all material assumptions and technical parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially changed.

The information in this report that relates to Ore Reserves is based on information compiled by Mr John Battista, a Competent Person who is a Member and Chartered Professional (Mining) of the Australasian Institute of Mining and Metallurgy and is a former employee of Mining Plus (UK) Ltd. Mr Battista has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves (JORC Code). The Company confirms it is not aware of any new information or data that materially affects the information included in the relevant market announcement and all material assumptions and technical parameters underpinning the estimates in the relevant market announcements continue to apply and have not materially changed. In relation to the production target and forecast financial information referred to in the report, the Company confirms that all material assumptions underpinning the production target and the forecast financial information derived from the production target continue to apply and have not materially changed since the announcement of the feasibility study on 4 November 2019.

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au

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Tenement Schedule

The Company’s interests in tenements are set out below:

Location	Project	Tenement	Interest at	Interest at End
		No.	Beginning of	of Quarter
			Quarter
Western Australia	Iron Ridge	M20/118-I	100%	100%
Western Australia	Iron Ridge	E20/936	100%	100%
Western Australia	Iron Ridge	L20/83	100%	100%
Western Australia	Iron Ridge	L20/84	100%	100%
Western Australia	Iron Ridge	L20/85	100%	100%
Western Australia	Iron Ridge	G20/28	100%	100%

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Fenix Resources Limited, ABN: 68 125 323 622 Suite 10, 1202 Hay Street, West Perth, WA 6005 W: fenixresources.com.au, E: fenix@fenixresources.com.au