FMG shares surge on FY20 production results, shipments hit 178.2mt

We examine the highlights from FMG's June 2020 Quarterly Production Report.

FMG share price rises following June production release

Pure-play iron ore miner Fortescue Metals Group (FMG) reported a solid beat on its own shipment estimates for the full-year, as Chinese demand for its products remains robust.

Iron ore shipments came in at 47.3 million tonnes for the June quarter and 178.2 million tonnes in FY20, representing a year-over-year increase of 2% and 6%, respectively. FMG previously guided for full-year iron ore shipments of 177 million tonnes.

Costs continue to be tightly controlled, with FMG reporting FY20 C1 costs of US$12.94 per wet metric tonne, inclusive of Covid-19 related costs. At the end of the June quarter, FMG had US$4.9 billion in cash on hand against gross debt of US$5.1 billion.

‘This was an outstanding performance which underpinned the operational excellence we delivered in FY20, particularly during a quarter when we implemented a range of measures in response to COVID-19,’ Chief Executive Officer Elizabeth Gaines said in the June quarterly production release. ‘The impact of COVID-19 continues to be well managed across our operations, ensuring the safety and wellbeing of our team members, their families and our communities.’

In spite of the coronavirus pandemic, which has seen the operation of many global companies significantly disrupted, FMG has continued to see robust demand for its products, with it being noted that demand was outpacing seaborne supply.

This was well reflected on the top-line, with the miner reporting that it achieved an average revenue of US$79 per dry metric tonne, up 21% on a year-over-year basis. FMG attributed this to a combination of factors, including its market strategy, product mix, and general demand for its products.

Iron ore prices have remained elevated in 2020, with CME's iron ore 62% Fe front month futures contract last trading at US107.88 per tonne.

FMG shares, which were up 56% year-to-date as of Wednesday’s close, were bid to an intraday high of $17.450 per share off the back of today’s production release.

Where next: fiscal 2021 guidance at a glance

FMG today guided for FY21 iron ore shipments of between 175-180 million tonnes and C1 cost of between US$13-13.50 per wet metric tonne.

Fiscal 2021 capital expenditure (CAPEX) guidance was set at between US$3.0-3.4 billion – comprised of both growth projects and energy infrastructure investments.

‘We have a strong balance sheet and clear focus to reinvest in the business, develop our major growth projects and continue to deliver enhanced shareholder returns,’ said Chief Executive Elizabeth Gaines.

Looking forward, FMG will report its FY20 Results on 24 August and its September Quarter production results on 29 October.

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