Crossing the Bridge
2Q23 PRODUCTION
Need To Know
- Iron Bridge on target for first production end of March 2023 quarter
- FMG shipped 49.4mt FeO in 2Q23 at average received price of US$86.93/t
- Cash balance at 31Dec22 US$4bn, net debt US$2.1bn
Fortescue Metals’ core iron ore businesses are producing at incrementally better rates while holding costs below guidance. With first production from the new Iron Bridge magnetite mine due soon, FMG will burst through the 200mtpa mark for iron ore production.
2Q23 production. Ore shipped reached 49.4mt taking 1H23 shipments to 96.9mt. Excluding Iron Bridge, FMG is well on track to achieve unchanged FY23 guidance of 187-192mt FeO.
Average achieved iron price of US$86.93/dmt was 88% of the average Platts 62% CFR Index. Prices have been climbing as China re-opens its economy and the index finished the quarter at US$117.35/dmt at 31 December 2022 with spot prices now at ~US$122/dmt. FMG’s earnings are highly sensitive to iron ore prices.
Production costs (C1) were a strong point of the release. At US$17.17/wmt, FMG has averaged C1 costs of US$17.43/wmt for 1H23 compared to guidance for FY23 of US$18.00-18.75/wmt.
The Iron Bridge magnetite project is closer to first production at the end of the March quarter. The project will cost FMG close to the top end of its range of US$3.6-3.8bn (FMG share US$2.7-2.9bn).
Fortescue Future Industries (FFI) continues to shotgun money and ideas on green hydrogen although its 1H23 spend of US$226m was within budget and relatively modest. The latest pronouncements include agreements to work with the Kenyan and Egyptian Governments on separate projects. FMG attended ‘over 100 meetings’ at the recent World Economic Forum in Davos. Executive Chairman Dr Andrew Forrest said: “This gives us confidence that global capital markets will be aligned to progress five FFI green energy projects to Final Investment Decision in calendar 2023 allowing first production in 2024.”
Investment view
On its own, the iron ore business continues to deliver solid results, enhanced by some very good prices in recent years. But the green energy crusade is mostly lacking financial details that investors implicitly need to know. FFI has embarked on a whirlwind of agreements, MoUs, partnerships and JVs that will eventually require meaningful amounts of shareholder and debt capital. Until that becomes more transparent, the risk element to FMG keeps rising.
Stock Overview
Share Price
Company Overview
FMG is a West Australian iron ore producer. Its Pilbara operations produced 189mt of iron ore in FY22. FFI is aiming to produce 15mt of green hydrogen annually by 2030 to align with the strategy of achieving carbon neutrality by 2030.
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