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FMG share price: December quarterly production report examined

We look at the highlights from the miner’s Q2 production report.

Confidence rising

As iron ore prices have continued to rise, Fortescue Metals Group (FMG) has continued to benefit.

Indeed, over the last year investors have grown increasingly optimistic around FMG’s future, bidding the stock up more than 100% in the previous twelve month period. The pure play iron ore miner last traded at $22.66 per share – giving it an implied market capitalisation of $69.80 billion.

At that market value, FMG trades on a 11.36x earnings multiple. For reference, mining large cap rivals BHP Group and Rio Tinto trade at ~22x and ~19x earnings, respectively.

December quarterly production results in focus

Looking at shipments data first, on this front FMG said it shipped 46.4 million tonnes during the quarter, rounding out a record half where the miner shipped 90.7 million tonnes of iron ore, all up.

Looking at some of FMG's other key operational metrics, the miner reported that it mined 50.0 million wet metric tonnes of iron ore during the quarter, processed 44.2 million tonnes and maintained a C1 cost of US$12.81 per wet metric tonne, a shade higher than in Q1.

Boosted by buoyant iron ore prices and a solid operational performance, FMG said that its revenue on a per tonne basis increased 15% –quarter over quarter – with the miner booking average revenues of US$121.84 per dry metric tonne during the second quarter.

Commentating on these quarterly results, Fortescue’s Chief Executive Officer, Elizabeth Gaines, said:

'Fortescue is continuing to deliver strong results for FY21 across all key measures of safety, production and cost; and during the quarter the team achieved a key milestone of first ore at our Eliwana mine. Saftey performance was steady, with the TRIFR remaining at 2.1 on a 12 month rolling basis supported by a strong focus on hazard reduction.'

'Across the business, our entire team is achieving excellent operational performance while continuing to manage challenges associated with COVID-19, including border restrictions. These measures, to protect the health and safety of all of our employees and contractors, enables Fortescue to maintain its strong contribution to the Western Australian and national economies.'

Elsewhere, FMG's much hyped Eliwana mine project – located close to the port of Hedland in Western Australia – achieved first ore during the back half of the December quarter. The company described this as a ‘significant milestone’, further saying that:

'The project transitioned to the Operations team in January 2021, with the focus on the commissioning and ramp-up of the ore processing facility.'

The outlook

FMG again reiterated its FY21 guidance, saying it expected iron ore shipments to come in at between 175-180 million tonnes, C1 costs of between US$13.00-13.50 per wet metric tonne, and CAPEX of between US$3.0-3.4 billion.

That guidance is made on an assumed AUD/USD exchange rate of $0.70.

FMG closed out Tuesday’s session at $22.71 per share.

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