Shares in Andrew "Twiggy" Forrest’s Fortescue Metals Group climbed above $7 yesterday for the first time since September 2008 (when it was crashing as the credit crunch bit hard) after it issued an encouraging quarterly report for the three months to December.
Despite a small rise in shipments and a nasty 20% jump in per tonne production costs, traders took heart from a sharp rise in per tonne iron ore prices of $US25 a tonne from the September quarter.
That, on steady production and sales means the company is, like Rio Tinto, looking at a sharp rise in earnings. In this case it’s interim profits, in Rio’s it’s the full year.
Fortescue could be looking at a $250 million boost to revenue, although the impact on profit will be upset by that sharp rise in production costs.
Despite that rise in costs, the shares jumped by more than 8%, or 54c to $7.27, the highest they have been since September 4, 2008, which was when they opened above $7 but fell to end well under that level by the close that day.
The rise yesterday saw Mr Forrest’s net worth hit an estimated $6.8 billion, with a rise of over $350 million on the day.
The company reported a 9% rise in iron ore production – to 9.93 million tonnes – in the December quarter versus a year ago
The 9% gain compared with the December quarter in 2009. Output fell 1.5% when compared with the July-September period in 2010.
The small fall was ignored by the market which settled on news of a greenlight for the next round of expansion and the sharply higher average selling price.
The company’s board also gave approval for a $US8.4 billion ($A8.5 billion) investment to almost triple iron ore production from 55 million tonnes to 155 million tonnes per year.
Fortescue, Australia’s third-biggest iron ore miner after Rio Tinto and BHP Billiton, said it sold its iron ore at an average of $US150 per tonne, up from $US125 in the September quarter.
A comparison was not given with the same quarter of 2009, but remarks in the quarterly report for that period suggested the company saw prices around $US110 a tonne.
Including ore shipped for third parties, the Perth-based company shipped 10.59 million tonnes, up 3.2% from 10.26 Mt previously.
Fortescue shipped 663,952 tonnes for third parties in the December quarter, a 277% jump from 175,998 tonnes in the previous period.
