FENIX RESOURCES LTD — Interim / Quarterly Report 2021

Jan 19, 2021

FENIX RESOURCES LTD Office 10, Emerald House 1202 Hay St, West Perth WA 6005

T: +61 (0)8 9226 2011 E: info@fenixresources.com.au ABN 68 125 323 622

20 January 2021

December Quarterly Activities Report

Iron ore production underway, first shipment set for early February

Highlights

• Production underway at Fenix’s 100%-owned Iron Ridge iron ore project in Western Australia’s Mid-West, with first shipment of approximately 60,000 tonnes of combined lump and fines product scheduled for early February.

• Activities in the December Quarter included:

• Binding Port Access and Services Agreement and a binding Port Lease Agreement signed with the Mid West Ports Authority, operator of the Port of Geraldton

• MACA Limited appointed crushing and screening and mining contractor

• Binding term sheet signed for the purchase of the existing port facilities from Sinosteel Midwest Corporation at Geraldton Port for $1 million

• Offtake Agreement signed with Sinosteel International Holding Company for 50% of production and sales from Iron Ridge

• Road transport contract for Iron Ridge iron executed with Fenix Newhaul Pty Ltd, an incorporated joint venture company between Fenix and Newhaul

• Appointment of highly experienced iron ore executive, Mr Warwick Davies, as NonExecutive Director

West Australian high-grade iron ore developer, Fenix Resources Limited ( Fenix or the Company ) (ASX: FEX) is pleased to report on its activities for the December 2020 quarter ( December Quarter ).

During the December Quarter, the Company continued to make significant progress on its planned development of the Iron Ridge iron ore project ( Iron Ridge Project or the Project ) in Western Australia’s MidWest, which culminated in production commencing in December 2020 and first shipment scheduled for early February 2021. Timing of the first shipment has been adversely impacted by a planned maintenance shutdown on the Berth 5 shiploader (scheduled for February 1-5) at the Geraldton Port organised by the Mid West Ports Authority.

Page 1 of 7

==> picture [109 x 42] intentionally omitted <==

IRON RIDGE PROJECT - OPERATIONS

Exploration, Production and Development Activity

On 21 December 2020, the Company announced that production had commenced at the Iron Ridge Project. Lump and Fines products are now being stockpiled at the Port of Geraldton in preparation for the first shipment, which is expected to take place early February 2021. Production and road haulage is ramping up in line with expectations, with deliveries to the Fenix-owned port facilities currently at approximately 60% of planned annualised output, with full capacity of 1.25Mtpa expected in March 2021. As at 17 January 2021, there was slightly more than 32,000 tonnes of product stored in the port shed ready for export.

As several large capital expenditure items were still being completed post the end of the quarterly period, payment for these items was not made during the December quarter but will be reflected in the cash flow for the March 2021 quarter. The Company’s cash reserves of $10.2m at 31 December 2020, will be more than adequate to cover this delayed capital expenditure.

There was no substantive exploration activity undertaken by the Company during the quarter.

Offtake Agreements and Service Provider Contracts

During the December Quarter, the Company announced the execution of a binding offtake terms sheet with Sinosteel International Holding Company Limited ( Sinosteel Binding Offtake Terms Sheet ). Fenix now has sales arrangements in place for 100% of projected iron production from Iron Ridge, after Atlas Iron subsidiary Weld Range Iron Ore Pty Ltd previously took up a marketing election on 50% of production and sales for the Project (refer ASX release dated 31 August 2020 “Marketing agent for 50% of Iron Ridge production secured”).

On 19 October 2020, the Company announced that it had awarded the drill & blast, mining, and crushing & screening contract for the Iron Ridge Project to MACA Limited ( MACA ). Early stage works commenced in September 2020 using local contractors, with MACA mobilising heavy earthmoving equipment to site in the December Quarter. Open pit mining and crushing and screening operations commenced in the December Quarter.

On 26 October 2020, the Company announced the execution of a contract for the road transport component of its Iron Ridge Project with Fenix Newhaul Pty Ltd (formerly Premium Minehaul Pty Ltd) ( Fenix Newhaul ). As announced on 7 May 2019, Fenix Newhaul is the incorporated joint venture company established to implement the strategic alliance between the Company and Craig Mitchell, the founder and former owner of Mitchell Corp, a major supplier of transport and logistics services to the Western Australian mining industry. Fenix Newhaul is 50% owned by the Company and 50% owned by Newhaul Pty Ltd (formerly Minehaul Pty Ltd), an entity controlled by Mr Mitchell.

Port Infrastructure Acquisition

On 14 October 2020, the Company announced that it had executed a binding terms sheet with Sinosteel Midwest Corporation Limited ( SMC ) to acquire SMC’s iron ore storage shed, truck unloading and conveyor systems located at the Geraldton Port.

SMC owns the Weld Range Iron Ore project, which is adjacent to Fenix’s Iron Ridge Project, and is a wholly owned subsidiary of Sinosteel Group Corporation Limited, a Chinese State Owned Enterprise. Additional to the sale and purchase of the Port infrastructure, SMC and the Company also reached agreement to cooperate on commercial terms to ensure that the Iron Ridge project has the necessary lease area to fit all of its infrastructure during the economic life of the Iron Ridge Project.

Page 2 of 7

==> picture [109 x 42] intentionally omitted <==

Port Access and Lease Agreements

During the December Quarter, the Company also announced that it had executed a Port Lease Agreement and a Port Access and Services Agreement with Mid West Ports Authority (MWPA) for the export of iron ore products through the Port of Geraldton. The Agreement allows Fenix to export 1.25 million tonnes per annum of iron ore. The initial term of the agreement is four years, with two additional two-year extensions able to be triggered at Fenix’s election.

CORPORATE

Appointment of Non-Executive Director

On 10 November 2020, the Company announced the appointment of Mr Warwick Davies as Non-Executive Director. Mr Davies has worked in the iron ore and minerals industries for over 50 years. Initially employed by BHP Steel in their Newcastle and Whyalla steel works, he moved to the Pilbara with Hamersley Iron in 1969 beginning a 4-decade involvement in iron ore in technical, operational and commercial roles. Mr Davies is an Industrial Chemist with a strong economics background where his iron ore experience was developed with the Robe River organisation until 2001 when a take-over by Rio Tinto Limited resulted in a career change. Mr Davies became a consultant working and providing advice to Mt Gibson Iron and Atlas Iron during their respective start-ups. Mr Davies has extensive experience in all commercial aspects of the iron ore market including freight supported by his strong technical marketing background.

Board Position Change

During the December Quarter, the Company also announced that Mr Garry Plowright will step down from his executive role with the Company and will move into a Non-executive Director role, effective 1 January 2021.

Financial

During the December Quarter, the Company issued a total of 39,700,000 fully paid ordinary shares in the capital of the Company upon exercise of 39,700,000 unlisted options exercisable at $0.08 per option on or before 21 November 2021, receiving $3.2 million.

In accordance with ASX Listing Rule 5.3.5, $155,421 of payments were made to related parties or their associates during the quarter, comprising Executive Director salaries, Non-executive Director fees and superannuation.

USE OF FUNDS

Fenix was re-admitted to the official list of ASX on 30 November 2018 following completion of an IPO raising $4.5 million. The December Quarter is included in a period covered by a Use of Funds statement in the IPO Prospectus lodged with ASX under Listing Rule 1.1 condition 3. A comparison of the Company’s actual expenditure since re-admission to 31 December 2020 against estimated expenditure in the Use of Funds statement is set out below in accordance with ASX Listing Rule 5.3.4. The table also shows the Company’s expenditure for the December Quarter, as required by ASX Listing Rule 5.3.1:

Page 3 of 7

==> picture [109 x 42] intentionally omitted <==

Prospectus Use of Funds	Budgeted ($)	Actual ($)	Actual ($)
		Q2 FY21	TOTAL
Iron Ridge Project expenditure
Site preparation and logistics contracts	40,000	5,790,135	7,214,149
Exploration & project development management	550,000	362,498	1,262,885
Magnetic survey	50,000	0	45,480
Hydrological evaluation	50,000	0	366,805
RC drilling - mobilisation, drilling charges and consumables	400,000	0	546,619
Diamond drilling – mobilisation drilling charges and consumables	430,000	0	665,919
Exploration technical support - geological logging, wireline		0	137,510
logging, analysis	80,000
Geological review and reporting	100,000	0	94,018
Resource estimation	105,000	0	60,048
Development permitting and approvals	400,000	32,093	812,598
Feasibility and metallurgical studies	300,000	0	307,705
Tenement Costs	10,000	14,896	42,511
Iron Ridge Project Expenditure sub-total	2,515,000	6,199,622	11,556,246
Corporate and administration costs	950,000	386,000	1,494,000
Costs of Offers and Acquisition	570,000	0	699,000
Working Capital	965,000	192,000	936,000
TOTAL Funds Allocated	5,000,000	6,777,622	14,685,246

Summary of Material Variances

The Company’s IPO Prospectus assumed a timeframe of twenty-four months to complete project exploration and evaluation activities including but not limited to hydrology, resource drilling, resource estimation, metallurgical test work and feasibility studies at Fenix’s flagship Iron Ridge Project. It was not envisaged that the Project would be advanced to the level that a Feasibility Study has been completed, Ore Reserves have been declared and all necessary permits and approvals for project start-up received.

The accelerated advancement of the Project during the period since re-admission to the ASX has meant that expenditure has exceeded initial expectations. This includes significant capital expenditure on developing the Iron Ridge mine incurred in the December Quarter that has been allocated to site preparation and logistics contracts.

Authorised by the Board of Fenix Resources Limited.

For further information, contact:

Rob Brierley Managing Director Fenix Resources Limited

Page 4 of 7

==> picture [109 x 42] intentionally omitted <==

About Fenix Resources

Fenix Resources is an ASX-listed, WA-based minerals explorer transitioning to miner.

The Company’s 100% owned, flagship Iron Ridge Iron Ore Project is a premium DSO deposit which hosts a JORC 2012 compliant resource located around 490 km by road from Geraldton port.

High grade iron ore attracts a premium price on the seaborne market as Chinese steel works increasingly demand more pure inputs with lower emissions due to increasingly strict government regulations.

Only requiring crushing and screening, 1.25 million tonnes of ore per annum is proposed to be trucked to the port by a JV signed off in May 2019, with trucking specialist Newhaul Pty Ltd headed by respected logistics expert Craig Mitchell who was the founder and owner of Mitchell Corp before selling to Toll Group. In relation to the production target, the Company confirms that all material assumptions underpinning the target continue to apply and have not materially changed since the announcement of the feasibility study on 4 November 2019.

Export capacity has been secured through binding agreements with the Mid-West Ports Authority for the use of its Geraldton Port facilities. Product sales are planned to be conducted 50% through an offtake arrangement with Sinosteel International Holding Company Limited and 50% through a marketing agreement with Atlas Iron Limited.

Statutory permitting is complete, the mining and road transport contracts have been awarded and contract documentation with other key service providers is advanced.

A total of approximately three hundred and fifty (350) Full Time Equivalent (FTE) direct and indirect jobs throughout the supply chain will be created including seventy (70) FTEs on site at the Iron Ridge mine.

Geraldton is set to be a winner with around one hundred (100) FTEs created including approximately seventy (70) roadtrain drivers and a fleet maintenance depot established with an additional thirty (30) jobs. More jobs will be created at the Port and at local businesses and contractors that service the project.

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

Classification	Tonnes Fe Al2O3 LOI P SiO2 TiO2
	Mt % % % % % %
Indicated	10.0 64.3 2.56 1.90 0.046 3.21 0.09
Inferred	0.5 62.5 2.80 3.13 0.046 4.41 0.12
Total	10.5 64.2 2.57 1.96 0.046 3.26 0.09

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

The Project’s Ore Reserves are categorised in Table B below, as announced on 4 November 2019 titled “Feasibility Study Generates Outstanding Cashflow”.

Classification	Tonnes Fe Al2O3 LOI P SiO2 TiO2
	Mt % % % % % %
Probable	7.76 63.9 2.79 2.00 0.05 3.46 0.09
Total Ore Reserves	7.76 63.9 2.79 2.00 0.05 3.46 0.09

Table B: Iron Ridge Ore Reserves

Page 5 of 7

==> picture [109 x 42] intentionally omitted <==

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 employee by 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 currently employed by 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.

Page 6 of 7

==> picture [109 x 42] intentionally omitted <==

TENEMENT SCHEDULE

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

Location	Project	Tenement No.	Interest at beginning of Quarter	Interest at end of 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%

Page 7 of 7