Summary
- ASX-listed iron ore giant Fortescue Metals Group Limited (ASX:FMG) traded in green with the stock reaching an intraday high of $16.540 on 29 October (1:30 PM AEDT).
- The stock surge on the ASX after a recent decline from the top of $17.140 was primarily led by a strong quarterly performance.
- FMG shipped 5 per cent higher iron ore against pcp over strong demand from China.
- Higher shipment, lower cost, higher average realised price on sales, and strong cash position uplifted market sentiments.
ASX-listed Fortescue Metals Group Limited (ASX:FMG) boosted iron ore shipment by 5 per cent in Q1 FY21 on the back of strong demand from China. The iron ore miner shipped 44.3 wet metric tonnes in Q1 FY21 against the previous corresponding period (or pcp).
The Company notified the market that the September 2020 quarter started strong with record operating performance.
The market seems to be reacting positively to the price-sensitive announcement with the company’s share trading under the green zone for the second consecutive session on ASX post witnessing a tumble from the level of $17.140 (intraday high on 19 October 2020) to the recent low of $16.100 (intraday low on 27 October 2020).
September Quarterly Highlights
ASX-listed iron ore giant mined 58.4 wet metric tonnes (or wmt) of ore during the period, up by 15 per cent against pcp and 2 per cent against the previous quarter.
- Likewise, ore processing witnessed a 2 per cent increase against pcp and an 8 per cent increase against the previous quarter.
- Though the first quarter shipment surged by 5 per cent against pcp, it witnessed a quarterly decline of 6 per cent. But the lower cost seems to have uplifted the market sentiment with the cash cost for the period declining by 2 per cent against both pcp and the previous quarter at USD 12.74 per wmt.
- The decline in cash cost was primarily led by a lower strip ratio of 1.3 and low fuel prices, offsetting a stronger AUD:USD exchange rate.
China’s Iron Ore Demand Grows Strong
Crude steel production in the nine months to September 2020 reached 781.6 million tonnes, up by 4.5 per cent against pcp. The surge in iron ore demand across China against pcp supported higher shipment with iron ore stocks across Chinese ports surging to 116 million tonnes (as on 30 September 2020).
- Furthermore, the surge in iron ore demand supported the Company’s product price with FMG realising an average price of USD 105.77 per dry metric tonnes (or dmt) for the period.
- The realised price for the quarter remained 89 per cent of the average Platts 62 per cent CFR Index of USD 118.21 per dmt.
- The surge in the average realised price further supported the revenue per tonne with the iron ore miner reporting a 31 per cent increase in the same against the previous quarter.
Also Read: Chinese Economy Gaining Strength, What’s in for the Australian Miners?
Liquidity Position
At the end of the period (as on 30 September 2020), the net cash position, supported by strong free cash flow, reached USD 1.0 billion as compared to net debt of USD 0.3 billion during the previous quarter.
- The Company repaid a revolving credit facility during the period while reporting USD 889 million of capital expenditure.
- Cash on hand at the end of the period stood at USD 5.1 billion, up by ~ 4.08 per cent against the previous quarter.
- With a strong cash position, FMG allocated USD 2.2 billion for FY2020 final dividend (paid on 2 October 2020) and USD 850 million reserved for FY2020 final tax payment (due in December 2020).
At present, the market seems to be cherishing the strong start and high liquidity with the stock reaching $16.540 (1:30 PM AEDT) during the day’s session.
Also Read: ASX Iron Ore Miners Share Prices up, what are the reasons behind it?
(All currencies in AUD unless or otherwise stated)
