FMG presents Quarterly production results for March 2019

FMG

Fortescue Metals Group Limited (ASX: FMG), a global leader of the iron ore industry, presented its quarterly production results for March 2019 on 18th April 2019.

As per the company’s report, Fortescue mined 48.0 million tonnes of ore in Q3FY19, down by 2% as compared to 49.2 million tonnes mined in Q2FY19. The overburden removal also declined by 7% and stood at 67.3 million tonnes in Q3FY19, as compared to 72.5 million tonnes in Q2FY19.

Fortescue processed 43.0 million tonnes of ore in Q3FY19, up by 1% as compared to 42.5 million tonnes processed in Q2FY19. However, despite a 1% increase in ore processing, a decline in mined ores was reflected on the total ore shipment. The company shipped 38.3 million tonnes of ore in Q3FY19, down by 10% as compared to 42.5 million tonnes in Q2FY19.

The cash production cost (C1), rose by 4% and stood at US$13.51/wmt in Q3FY19, as compared to US$13.01/wmt in Q2FY19.

Operational Highlights:

As per the company, the total recordable injury frequency (TRIFR) stood at 3.6 in Q3FY19 on a rolling 12-month basis, an improvement of 10% as compared to 4.0 in December 2018. The company also recorded a low of 2.1 in TRIFR during the quarter. The decline in the injury rate promotes the ESG considerations of the company.

The company mentioned that the decline in shipment accounted for the impact of the Tropical Cyclone Veronica, which resulted in the suspension on port activities for five days and flooding to the railway near the port operations.

Fortescue also suggested that the cost of production rose amid the impact of the cyclone in the Pilbara Region.

The breakout of the shipment of different product mix is: 

Source: Company’s quarterly production report: Refer ASX announcement on 18th April 2019

Marketing Highlights:

As per the data from China’s National Bureau of Statistics, the crude steel production reached 231 million tonnes in the first quarter of the year 2019, up by 9.9% on a yearly basis. Fortescue mentioned that the steel inventories in China declined amid high consumption in the domestic market.

As a result of the supply shortage of iron ore in the global market and high steel demand in China, the iron ore prices stood strong during the quarter and the company’s product mix realized average price of $71/dmt, which was up by 47% as compared to the average realized of US$48/dmt in the December 2018 quarter.

The prices across different ports realized by the company: 

Source: Company’s quarterly production report: Refer ASX announcement on 18th April 2019

Financial Highlights:

The cash on hand (as on 31st March 2019) stood at US$1.1 billion, and gross debt (as on 31st March) stood at US$4.0 billion with net debt of US$2.9 billion. The total capital expenditure for the quarter stood at US$ 196 million and total exploration expenditure for the March 2019 quarter stood at US$18 million.

Iron Ore Projects:

The company announced on 2nd April 2019 about the stage 2 of Iron Bridge Magnetite Project, a US$2.6 billion project, which is estimated to produce 22mt of 67% premium iron grade (a low impurity concentrate product). The project is an unincorporated Joint Venture between the FMG Magnetite Pty Ltd and Formosa Steel IB Pty Ltd and is being de-risked.

The delivery of iron ore from the project is expected in the H1FY22, with an AISC of US$45-55/dmt including C1, sustaining capital expenditure, royalties, etc.

Fortescue mentioned that Eliwana Mine and Rail Project, a US$1.275 billion project, is progressing as per the company’s expectation and will achieve first ore on the train on schedule and budget in December 2020.

The stock of the company closed at A$7.480 (as on 18th April), up by 0.67% as compared to its previous close. The stock has offered impressive YTD return of 82.17% this year.


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