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Fortescue jumps on record production, dividend next?


The Fortescue Metals Group Limited (ASX: FMG) share price is up 3% after the miner announced record shipments.

Fortescue is one of Australia’s largest iron ore miners. How much resources it produces can have a significant impact on shareholder returns.

Fortescue’s strong quarter

  • Here are some of the highlights from Fortescue’s quarterly update:

    • FY22 Q3 quarterly ore shipped was 46.5mt, down 2% on the FY22 second quarter, but up 10% on FY21 Q3
    • Record shipments for the nine months to 31 March 2022 was a record of 139.5mt
    • FY22 Q3 average revenue was US$100 per dry metric tonne (dmt).
    • C1 mining costs were up 3% quarter on quarter to US$15.78 per wet metric tonne (wmt)
    • Net debt was US$2.4 billion at the end of the quarter
    • It acquired Williams Advanced Engineering for US$221 million
    • Fortescue Future Industries (FFI) has started production of the green energy manufacturing centre in Gladstone, Queensland

    There were some good positives. More shipments and higher revenue per tonne mean Fortescue can generate more total revenue and higher profits. This could be helpful for the Fortescue share price and the dividend.

    However, it wasn’t all positive.

    Increased costs

    Fortescue increased its guidance for the overall FY22 C1 cost to US$15.75 to US$16 per wmt, up from US$15 to US$15.50 per wmt. The company explained that the costs in the quarter increased, including diesel, other consumables and labour rates.

    The Iron Bridge Magnetite project capital estimate has been revised to a range of US$3.6 billion to US$3.8 billion, which was previously US$3.3 billion to US$3.5 billion. This project will deliver 22mt per annum of high-grade iron ore. However, it has suffered from COVID labour constraints, with the workforce being “significantly below” the project workforce plan for the March quarter.

    Iron Bridge also suffered from ongoing supply chain issues, higher construction costs, as well as higher logistics and shipping costs.

    Higher shipment guidance

    Fortescue increased its iron ore shipments guidance for FY22 to a range of 185mt to 188mt. This was an increase from the previous guidance of 180mt to 185mt.

    My thoughts on the update and Fortescue share price

    Fortescue says that it’s well placed to finish the financial year strongly. Its green division is making progress for decarbonisation for both Fortescue’s operations and the broader decarbonisation of industrial sectors of the world.

    I’m a Fortescue shareholder myself, but I try to buy shares during periods of weakness for the iron ore price and the Fortescue share price. For now, the shares are too high for me to consider buying more, but I’m optimistic about the company’s FFI division in the coming years.

    Information warning: The information in this article was published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169

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