Fortescue share price plummets 5% amid weaker production

Female worker sitting desk with head in hand and looking fed upFemale worker sitting desk with head in hand and looking fed up

The Fortescue Metals Group Limited (ASX: FMG) share price is tumbling on the back of the iron ore giant’s latest quarterly production results.

Right now, Fortescue stock is trading at $20.42 – 5% lower than its previous close.

Fortescue share price falls as iron ore production slumps

Here are the key takeaways from the S&P/ASX 200 Index (ASX: XJO) giant’s production for the March quarter:

  • Ore mined fell 16% quarter-on-quarter (QoQ) and 3% year-on-year (YoY) to 50.3 million wet metric tonnes (wmt)
  • Processed 46.1 million wmt of ore – down 8% QoQ but up 17% YoY
  • Shipped 46.3 million wmt of ore – a 6% QoQ fall and flat YoY
  • C1 cost (representing the ‘direct’ production costs of iron ore) jumped 3% QoQ and 12% YoY to US$17.73 per wmt
  • Average revenue came in at US$109 per dry metric tonne (dmt) ­– a 25% QoQ improvement and 9% higher YoY

Fortescue’s shipments for the first nine months of financial year 2023 came in at a record 143.1 million tonnes – a 3% jump on the prior comparable period.

The company ended the period with US$4 billion of cash and $6.1 billion of debt.

What else happened last quarter?

Perhaps the most exciting update in today’s release concerns its majority-owned Iron Bridge Magnetite Project.

Several key milestones were achieved at the project last quarter, culminating in its maiden wet concentrate production last week. Its production will now be pumped to Port Hedland.

The project is expected to produce 22 million tonnes of high-grade 67% iron magnetite concentrate annually, while Fortescue’s share of its capital estimate is around US$3 billion.

Fortescue’s green energy leg Fortescue Future Industries (FFI), also has a busy quarter. It completed construction works at its Gladstone electrolyser manufacturing facility, advanced the Norwegian Holmaneset Project, and signed an investment support and implementation agreement with the Government of Kenya.

What did management say?

Fortescue CEO Fiona Hick commented on the update driving the company’s share price today, saying:

On the Iron Bridge Magnetite Project, I am pleased to report that the first wet concentrate was produced on Friday.

This is a significant milestone for Fortescue as Iron Bridge represents our entry into the highest grade segment of the iron ore market, providing an enhanced product range while also increasing production and shipping capacity.

Together with our strong balance sheet and focus on investing in growth, we are well placed to advance our transition to a global green metals and energy company and ensure all stakeholders continue to benefit from Fortescue’s success.

What’s next?

The ASX 200 mining giant’s full-year guidance hasn’t been changed today. It still expects to ship between 187 million tonnes and 192 million tonnes of iron ore in financial year 2023.

Fortescue’s C1 cost for hematite is tipped to come in between US$18 per wmt and US$18.75 per wmt while its capital expenditure (excluding FFI) is forecast to reach US$2.7 billion to US$3.1 billion.

Finally, FFI is anticipated to demand between US$500 million and US$600 million of operating expenditure and US$230 million of capital expenditure.

Fortescue share price snapshot

Today’s fall sees the Fortescue share price handing back much of its 2023 gains.

The stock has risen just 0.1% higher than it was at the start of this year. Meanwhile, it’s gained 3% since this time last year.

For comparison, the ASX 200 has gained 5% so far this year and is trading flat over the last 12 months.

The post Fortescue share price plummets 5% amid weaker production appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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