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Fortescue Metals Group (ASX: FMG) Achieves Record Iron Ore Shipments and Improved Financial Metrics
Fortescue Metals Group has concluded a highly successful operational year, showcasing record iron ore shipments totalling 198 million tonnes—surpassing guidance while achieving substantial cost efficiencies that enhanced cash flows and bolstered the company’s financial standing.
Robust Operational Results Exceed Predictions
The results for the June quarter outperformed consensus expectations across crucial indicators. Iron ore shipments reached 55.2 million tonnes, exceeding estimates of 54.1 million tonnes, while hematite C1 costs were reported at US$16.29 per wet metric tonne, significantly lower than the anticipated US$18.10.
June Quarter Highlights:
- Iron Ore Shipments: 55.2 million tonnes (compared with 54.1 million tonnes estimated, a beat of +2.1%)
- Ore Mined: 64.3 million wet metric tonnes (estimated 61.1 million wet metric tonnes, a beat of +5.2%)
- Hematite C1 Cost: US$16.29 per wet metric tonne (below estimates of US$18.10, a 10.3% improvement)
- Cash Generation: US$1.1 billion for the quarter
Financial Position Significantly Strengthened
Fortescue experienced substantial improvements in its financial position during the quarter, including:
- Cash Reserves: Rose to US$4.3 billion, up from US$3.3 billion in March
- Gross Debt: Slightly decreased to US$5.4 billion (compared to US$5.5 billion previously)
- Net Debt: Reduced to US$1.1 billion, down from US$2.1 billion
In perspective, Macquarie had projected that Fortescue would finish FY25 with US$3.97 billion in cash and a net debt of US$1.17 billion, indicating actual results were better than forecast by 8.3% and 6.0% respectively.
Upgraded Projections Indicate Continued Growth
The management has revised FY26 guidance upwards across several key performance indicators, reflecting solid operational progress. Expected iron ore shipments are now projected to be between 195-205 million tonnes, revised from the previous forecast of 190-200 million tonnes.
FY26 Guidance Updates:
- Iron Ore Shipments: 195-205 million tonnes (previously 190-200 million, +2.6% at midpoint)
- Iron Bridge Contribution: 10-12 million tonnes (up from 5-9 million tonnes, +57% at midpoint)
- Hematite C1 Costs: US$17.50-18.50 per wet metric tonne (previously US$18.50-19.75, a 5.9% reduction)
- Metals Capex: US$3.3-4.0 billion (previously US$3.5-3.8 billion)
- Energy Capex: US$300 million (down from US$400 million, a 25% cut)
The Iron Bridge magnetite project is continuing its staged ramp-up, with a target nameplate capacity of 22 million tonnes per annum by FY28.
Green Iron Initiatives on the Rise
Chief Executive Dino Otranto underscored the robust bilateral support for green iron initiatives following discussions in China, identifying considerable investment potential in creating a green iron and steel supply chain while also reducing emissions.
"After returning from China last week, the strong collaboration support between Australia and China for developing a green iron and steel supply chain suggests significant investment opportunities that could enhance trade ties and mitigate emissions on a large scale," Otranto affirmed.
Analysts’ Outlook
RBC Capital Markets analyst Kaan Peker anticipates a favourable market response, citing the quarterly results that exceeded expectations and the enhanced cost guidance. The flat to declining capital expenditure guidance is likely to please investors focused on maintaining capital discipline.
Peker highlighted that the impressive results stemmed from strong shipment volumes and excellent cost management, with hematite C1 costs residing at the lower end of guidance ranges. The cash generation of US$1.1 billion for the quarter also surpassed forecasts.
RBC maintains an "Outperform" rating on Fortescue, setting a target price of $19.00.
This summarised overview encapsulates Fortescue’s operational triumphs, financial fortification, and forward-looking guidance, setting a positive trajectory for the future.
