Iron Bridge starts
3Q23 PRODUCTION
Need To Know
- Iron Bridge first production 21 April
- FMG shipped 46.3mt FeO in 3Q23 at average received price of US$108.57/t
- Cash balance at 31Mar23 US$4bn, net debt US$2.1bn
- New Iron Ore CEO Fiona Hicks has started
The Iron Bridge magnetite project is now in production and provides an important step up in volume. Wet weather slightly impeded 3Q production but costs remain on track for the lower end of guidance.
3Q23 production. Ore shipped reached 46.3mt taking 9M23 shipments to 143.1mt. FMG is on track to achieve unchanged FY23 guidance of 187-192mt FeO.
Average achieved iron price of US$108.57/dmt was 87% of the average Platts 62% CFR Index price of US$125.50/dmt. FMG’s earnings are highly sensitive to iron ore prices.
Production costs (C1) were well contained. At US$17.73/wmt, FMG has averaged C1 costs of US$17.53/wmt for 9M23 compared to guidance for FY23 of US$18.00-18.75/wmt. FMG expects to achieve the lower end of guidance.
The Iron Bridge magnetite project is now in production and begins its climb toward 22mtpa at full cadence. The project will cost US$3.9bn just above its guided range of US$3.6-3.8bn (FMG share US$3.0bn).
Fortescue Future Industries (FFI). Anticipated capex for FY23 will be US$230m while operating costs will be US$500-600m.
Investment View
The iron ore business keeps plugging away and at last has the Iron Bridge magnetite project in the production column. The recovery of the Chinese economy is lifting crude steel production which is supporting the improved iron ore prices seen in recent months.
The emergence of Fortescue Future Industries (FFI) remains the key risk factor for FMG as it continues to consume up to 10% of FMG’s underlying net profit. Even this arbitrary slice of the pie is not set in stone and as FFI begins to find some realistic businesses in which to invest, the company continues to avoid shareholder questions on the return on such investment.
The IRA (Inflation Reduction Act in the USA) has become a giant tractor beam for subsidised investment into renewable energy and associated businesses. This could be significant enough to make the US the centre of the green hydrogen industry – FFI’s raison d’etre. We expect FFI to explore this avenue closely.
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.
Disclaimers and Disclosures
Issuer
The information and opinions contained within Sandstone Insights Research were prepared by MST Financial Services Pty Ltd (ABN 54 617 475 180, AFSL 500557) ("MST").
Reliance
Whilst MST make every effort to use reliable, comprehensive information in the construction of its reports, MST make no representation, warranty or undertaking of the accuracy, timeliness or completeness of information in this report. Save for any statutory liability that cannot be excluded, MST and MST employees, representative and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person.
General Advice
Any advice contained within Sandstone Insights Research is general advice only and has been prepared without taking into account any person’s objectives, financial situation or needs. Any person, before acting on any advice contained within Sandstone Insights Research, should first consider consulting with a financial adviser to assess whether that advice is appropriate for their objectives, financial situation and needs.
General Disclosures
This report should be read in conjunction with MST Disclaimers and Disclosures and is published in accordance with MST Conflict Management Policy which are available on the MST website: https://www.sandstoneinsights.com.au.
Currency of Research
The recommendations made in a Sandstone Insights Research report are current as of the publication date. If you are reading a report materially after publication, it is likely that circumstances will have changed and at least some aspects of the analysis may no longer hold.
Access and Use
Any access to or use of Sandstone Insights Research is subject to the Terms of Use. By accessing or using Sandstone Insights Research you hereby agree to be bound by our Terms and Conditions and hereby liable for any monies due in payment of accessing this service. In addition you consent to us collecting and using your personal data (including cookies) in accordance with MST Privacy Policy, including for the purpose of a) setting your preferences and b) collecting readership data so MST may deliver an improved and personalised service to you. If you do not agree to MST Terms of Use and/or if you do not wish to consent to MST use of your personal data, please do not access this service.
Equities Research Methodology
Please click here for information about MST equities research methodology.
Related Reports
Now for the hard part
FY23 result. An extraordinary year for PLS in terms of the cash and earnings generated by the combination of higher production and elevated commodity prices.
Milling about
A record year of cash earnings has prompted the Board to extend the buyback and lift the final dividend for shareholders.
Backyard cookup
Mineral Resources has effectively swapped out the downstream China risk to develop lithium battery chemicals with a more domestic pathway forward. This is likely to take longer and perhaps may rely on government support.