FMG reports strong iron ore shipment in Q3, keeps FY21 guidance unchanged

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FMG reports strong iron ore shipment in Q3, keeps FY21 guidance unchanged

 FMG reports strong iron ore shipment in Q3, keeps FY21 guidance unchanged
Image source: John Carnemolla, Shutterstock

Summary

  • Fortescue Metals Group has released its March quarter production report
  • The company posted record year-to-date shipment of 132.9 mt.
  • The company shipped 42.3 mt of iron ore, in line with shipment figures of the corresponding quarter last year.
  • The iron ore producer delivered average revenue of US$143 per dry metric tonne (dmt), 17% higher than the previous quarter.
  • The company has kept FY21 guidance unchanged for iron ore shipments and C1 costs.

Fortescue Metals Group (ASX:FMG), the World’s fourth-largest iron ore producer, has reported strong production figures for the March quarter of 2021, driven by record performance by its iron ore business. The company has managed to achieve quarterly shipment target and is well-placed to finish the financial year on strong note.

Image source:  © Slovegrove | Megapixl.com

Following quarterly performance report, the bluechip stock fell 1.5% in opening trade to AU$22.28 on the Australian Securities Exchange (ASX).

Meanwhile, peer companies, BlueScope Steel (ASX: BSL) and Champion Iron (ASX: CIA) were trading in green, while Deterra Royalties (ASX: DRR) witnessed bearish trade.

Operational Updates

For the third quarter ended 31 March 2021, Fortescue shipped 42.3 million tonnes (mt) of iron ore, which was in line with shipments figures of the corresponding quarter last year. On the year-to-date basis, the shipments stood at 132.9 mt, up 2% as compared to the same period in FY20, despite the impacts of significant rainfall across Fortescue’s Pilbara operations.

The iron ore producer said the commissioning of the Eliwana mine in Western Australia, in December last year, also contributed to ore mining and processing during the quarter.

Fortescue delivered average revenue of US$143 per dry metric tonne (dmt), 17% higher than the previous quarter. This represented revenue realisation of 86% of the average Platts 62% CFR Index.

On the safety front, Fortescue's total recordable injury frequency rate (TRIFR) was 2.2, compared to 2.1 in December quarter and 2.4 in June quarter of 2020.

Updating on the impact of pandemic on the business, the company said that no cases of COVID-19 has been reported across Fortescue’s operational sites, while key measures remained in place to safeguard its members and communities.

The cash production costs (C1) rose 16% to US$14.90 per wet metric tonnes (wmt) due to seasonally lower volumes and more robust exchange rates between USD and AUD. The year-to-date C1 cost was US$13.45/wmt.

Image Source: © Fedor-o | Megapixl.com

The company said that Chinese crude steel production stood at 1,065 mt for calendar 2020 and 271 mt in the first quarter of 2021, an increase of 15.6% compared to the same period in 2020.

Fortescue’s Chinese sales entity, FMG Trading Shanghai Co. Ltd, sold 2.6 mt in Q3 FY21 from regional ports in China.

Financial position

At the end of March 2021 quarter, the cash balance was US$3.6 billion as compared to US$4.0 billion as at 31 December 2020. In Q3 FY21, the company reported cash outflow of US$4.4 billion, which included US$3.5 billion for the FY21 interim dividend and US$909 million of capital expenditure.

The gross debt stood at US$4.6 billion in Q3 FY21, compared with US$4.1 billion in Q2 FY21, while net debt was US$1.0 billion.

During the quarter under review, Fortescue issued US$1.5 billion Senior Unsecured Notes at an interest rate of 4.375% with a maturity of April 2031. The redemption process is scheduled for completion by 30 June 2021 when the company’s gross debt is expected to be approximately US$4.3 billion.

FY21 Guidance Remained Unchanged

The company has kept FY21 guidance unchanged for iron ore shipments and C1 costs. While full-year iron ore shipments guidance remained unchanged at 178 million to 182 million tonnes, C1 costs have been pegged at US$13.50 -US$14.00/wmt.

The guidance for the capital expenditure has been revised to US$3.5-US$3.7 billion, citing rise in Australian dollar against US greenback, continuation of critical works at Iron Bridge and investment in decarbonisation initiatives.

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