Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<ul>
<li>This is a follow-up to our initiation, <a href="https://www.smartkarma.com/insights/fenix-resources-fex-au-small-cap-iron-ore-miner-with-great-upside" target="_blank" rel="noopener">Fenix Resources (FEX AU): Small Cap Iron Ore Miner With Great Upside. </a>The flagship mine added <a href="https://wcsecure.weblink.com.au/pdf/FEX/02890696.pdf" target="_blank" rel="noopener">another 5 years to the existing 3-year mine life</a>. </li>
<li>At a 60 AUD/ton operating margin for 1.4 million tons/Yr (assuming 100 USD/ton iron ore price), this is an additional 60-65 mn AUD of cash profit for 5 years.  </li>
<li>The company has commenced production in the Shine iron ore mine (1.2 mtpa) and will shortly begin production in the Beebyn-W11 mine (1.5 mtpa) in early 2025 after obtaining permits.</li>
</ul>


This is a follow-up to our initiation, Fenix Resources (FEX AU): Small Cap Iron Ore Miner With Great Upside. The flagship mine added another 5 years to the existing 3-year mine life. 
At a 60 AUD/ton operating margin for 1.4 million tons/Yr (assuming 100 USD/ton iron ore price), this is an additional 60-65 mn AUD of cash profit for 5 years.  
The company has commenced production in the Shine iron ore mine (1.2 mtpa) and will shortly begin production in the Beebyn-W11 mine (1.5 mtpa) in early 2025 after obtaining permits.


Fenix Resources (FEX AU): Positive Developments At Iron Ridge And Other Catalysts

<ul>
<li>In the countdown to the <a href="https://www.scmp.com/business/china-business/article/3289527/investors-search-fresh-china-stimulus-signs-ahead-xi-jinpings-economic-conference" target="_blank" rel="noopener">China Economic Work Conference (CEWC)</a>, which<a href="https://www.scmp.com/business/china-business/article/3289527/investors-search-fresh-china-stimulus-signs-ahead-xi-jinpings-economic-conference" target="_blank" rel="noopener"> </a>will be held on December 11th/12th, the iron ore market remains range-bound, expecting further clarity on the economic stimulus.</li>
<li>Stocks like <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale (VALE US)</a> and <a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" data-smartkarma-citation="entities:41:1" rel="noopener">Fortescue Metals (FMG AU)</a> continue to trade at double-digit dividend yields (9-10%), assuming 100 USD/ton.</li>
<li>With China's PMI improving, despite high inventories, there is an expectation of a restock for iron ore in the short term. We remain skeptical and continue to see range-bound activity.</li>
</ul>


In the countdown to the China Economic Work Conference (CEWC), which will be held on December 11th/12th, the iron ore market remains range-bound, expecting further clarity on the economic stimulus.
Stocks like Vale (VALE US) and Fortescue Metals (FMG AU) continue to trade at double-digit dividend yields (9-10%), assuming 100 USD/ton.
With China's PMI improving, despite high inventories, there is an expectation of a restock for iron ore in the short term. We remain skeptical and continue to see range-bound activity.


Iron Ore Tracker (9-Dec-2024): Stuck In A 95-110 USD/Ton Band, Restock On The Cards?

<ul>
<li>
<a href="https://www.smartkarma.com/entities/fenix-resources-ltd" target="_blank" data-smartkarma-citation="entities:7405:1" rel="noopener">Fenix Resources (FEX AU)</a> is a small-cap iron ore miner/logistics provider with massive upside based on an increasing sales profile from 1.3 to 4 million tons over FY25/26. </li>
<li>The company is also positioning itself as a logistics provider with the potential to transport 10 million tons of material through the Geraldton Port with its infrastructure in place. </li>
<li>Trading at 5.4x FY25e PE with a 1.8 EV-EBITDA, &gt;38% of the market cap in cash, this is a stock worth exploring.</li>
</ul>



Fenix Resources (FEX AU) is a small-cap iron ore miner/logistics provider with massive upside based on an increasing sales profile from 1.3 to 4 million tons over FY25/26. 
The company is also positioning itself as a logistics provider with the potential to transport 10 million tons of material through the Geraldton Port with its infrastructure in place. 
Trading at 5.4x FY25e PE with a 1.8 EV-EBITDA, &gt;38% of the market cap in cash, this is a stock worth exploring.


Fenix Resources (FEX AU): Small Cap Iron Ore Miner With Great Upside

<ul>
<li>Iron ore continued to lounge around the 117 USD/ton levels, but there is increased optimism for <a href="https://www.smartkarma.com/insights/iron-ore-and-the-china-property-auto-stimulus-angle" target="_blank" data-smartkarma-citation="insights:139280" rel="noopener">Iron Ore and The China Property/Auto Stimulus Angle</a> </li>
<li>Spreads between 65 and 62 widened to 13.8 USD/ton from 12.6 USD/ton last week, and we expect this spread to build further. </li>
<li>The street now widely anticipates the China TSF number between 9-15th of May, which is expected to grow in April at 14.5% YoY on consensus estimates to 1.4 trillion Yuan.</li>
</ul>


Iron ore continued to lounge around the 117 USD/ton levels, but there is increased optimism for Iron Ore and The China Property/Auto Stimulus Angle 
Spreads between 65 and 62 widened to 13.8 USD/ton from 12.6 USD/ton last week, and we expect this spread to build further. 
The street now widely anticipates the China TSF number between 9-15th of May, which is expected to grow in April at 14.5% YoY on consensus estimates to 1.4 trillion Yuan.


Iron Ore: 117 USD/Ton and Upwards to 130 Short-Term, Catalysts To Watch and Our Stock Screener

<ul>
<li>The short term is suddenly looking bullish for iron ore, as rumors abound that tier-1 cities in China may remove home-buying restrictions in May, and <a href="https://www.barrons.com/news/china-offers-nearly-1-400-for-car-trade-ins-2da76711?mod=news_archive" target="_blank" rel="noopener">auto stimulus</a> measures were announced. </li>
<li>Cities like <a href="https://www.businesstimes.com.sg/property/chinese-city-chengdu-relaxes-home-buying-rule-revive-sales" target="_blank" rel="noopener">Chengdu</a> and Nanjing have already announced measures to make home-buying more attractive, such as removing purchase qualifications and pilot programs for old-for-new home housing. </li>
<li>We like 62% Fe and see it trade up to its upper limit of 130 USD/ton (vs. current 117 USD/ton). On equities, we like <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale (VALE US)</a> .</li>
</ul>


The short term is suddenly looking bullish for iron ore, as rumors abound that tier-1 cities in China may remove home-buying restrictions in May, and auto stimulus measures were announced. 
Cities like Chengdu and Nanjing have already announced measures to make home-buying more attractive, such as removing purchase qualifications and pilot programs for old-for-new home housing. 
We like 62% Fe and see it trade up to its upper limit of 130 USD/ton (vs. current 117 USD/ton). On equities, we like Vale (VALE US) .


Iron Ore and The China Property/Auto Stimulus Angle

Australia

Fenix Resources Ltd operates as a resource exploration company. The Company explores for iron ore, vanadium, and manganese. Fenix Resources develops its projects in Australia.

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Fenix Resources (FEX AU)