“Well-Positioned” Fortescue Churns Out Another Record Quarter

Fortescue Metals has continued the solid September quarter performance by our major listed iron ore exporters.

The company told the ASX yesterday that it shipped a record 44.3 million tonnes, up 5% on the same quarter a year ago. BHP and Rio also did well in the three months to September 30 with small rises.

BHP’s total September quarter production was 74 million tonnes (including third party ore – 66 million tonnes in its own right) while Rio’s output was 82.1 million tonnes.

Fortescue also said it trimmed production costs by 2% to $US12.74 per wet metric tonne in the three months to September 30, in what CEO Elizabeth Gaines said reflected a continued focus on cost discipline.

On the pricing side the company said demand was particularly strong for sintering fines which helped support Fortescue’s pricing during the quarter and average revenue of $US105.77 per dry metric tonne. This represents revenue realisation of 89% of the average Platts 62% CFR Index.

“Against the backdrop of a strong performance for the first quarter, we are well-positioned for FY21 to meet our guidance, execute our growth strategy, and deliver returns to our shareholders,” Ms. Gaines said.

The lower costs and higher prices saw Fortescue achieve strong free cash flow generation during the quarter and lower debt.

Fortescue said it had net cash of $US1 billion on September 30, compared to net debt of $US300 million at June 30.

Cash on hand stood at $US5.1 billion at September 30. Though, this includes $US2.2 billion allocated to the 2020 final dividend, which was paid on October 2. It also includes approximately $US850 million reserved for the 2020 final tax payment, which is due in December.

Fortescue also reaffirmed its guidance for 2020-21 financial year. It continues to expect its iron ore shipments to be in the range of 175 million tonnes to 180 million tonnes, with C1 costs of $US13.00 to $US13.50 per wet metric tonne and an exchange rate of 70 US cents.

Fortescue shares edged up to $16.62.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →