Ann: New $70 Million Haulage and Logistics Contract, page-8

I'm coming around to the change of strategy. I really like the Twin Peaks agreement, its a very solid contract that appears very favourable for FEX (possibly more so than I thought now that I've had a quick review of the segment profitability), and I'm excited about Beebyn W-11.

I'm not too sure on this one, it sounds pretty good, $70m revenue over 3 years, but its for a sizeable number of tonnes, 3m. It only equates to just over $23 / tonne to haul from Ruvidini to Geraldton and for Port Services. In contrast Twin peaks is $60 / tonne. I know its a greater distance but seems like a big number especially as it appears that both will be hauled via road.

Just as a gauge I reviewed the half yearly statement at the segmental level (page 19 - note 7) and I got the volumes hauled / processed below from pages 6 and 7.



So revenue of $23 / tonne, port costs of nearly $7 / tonne, doesn't leave a lot for haulage and profit. Haulage is a much shorter distance than IR though, so wouldn't costs anywhere near $38 / tonne, but with only $16 / tonne left for haulage and profit it seems a pretty tight margin contract.

Now they did say that it was revenue "over" $70m but its tough to know how much "over" relates to and this is my biggest concern around the haulage / port services business, there is very little commentary around what the cost metrics are for it. For mining they go into C1 cash cost etc, but for haulage its literally just a few lines in the segment reporting that you can gauge cost from. Ie. it could be that a fair bit of the cost is fixed (scheduling etc) which means that this cost wouldn't necessarily be incremental for this new contract but we just don't know as they don't tell us that detail.

Thats primarily whats stopping me coming back in, forecasting what the future profitability and earnings might be.