Fortescue Metals Group is in line to report a huge profit for the year to June 30, judging by its performance in the final three months of the 2018-19 financial year.
The company – the third of the trio of Australian iron ore giants – yesterday said it achieved record quarterly shipments from the Pilbara thanks to continuing solid Chinese demand.
Fortescue said it shipped 46.6 million tonnes of iron ore in the June quarter, which included 4.7 million tonnes of the 60.1% West Pilbara Fines.
This brought its 2019 financial year shipments to 167.7 million tonnes, 1% down on 2017-18’s performance because of the impact of Cyclone Veronica in March.
Investors ignored the solid report and revenue boost and sent the shares down 5.5% to $8.25 on reports of more Brazilian iron ore becoming available shortly.
Fortescue’s performance came as Chinese steel mills looked to buy Fortescue’s lower quality (predominantly 58% iron ore products) to cut their raw material costs thanks to the surge in the price of higher-grade ore and the absence of 30 million tonnes or more of ore from Brazil in the wake of the January 25 mine tailings dam tragedy.
Crude steel production in China jumped 9.9% to 492 million tonnes in the first half of 2019 from the first half of 2018, with record monthly output reported for April and May, and a near-record in June.
Chinese port stocks are now being rebuilt (and with more Brazilian fines coming back onto the market in the next month) global prices fell to around $US114 a tonne on Wednesday.
Chinese stocks of iron ore fell 39 million tonnes over 2018-19, thanks in part to the Brazilian shortfall, the impact of Cyclone Veronica and problems Rio Tinto had at its WA operations with fires in loading terminals in January and March and quality problems at its Brockman Hub mining area at the moment.
Fortescue said its average revenue received jumped 30% in the June quarter from the three months to March with the prior quarter, reporting $US92 (A$131.9) per dry metric tonne.
For the year Fortescue said averaged average realised revenue, after taking into account mark to market adjustments, was $US65 a dry metric tonne jumped 50% compared to 2017-18’s $US44 a tonne.
That means Fortescue is looking at gross revenues of more than $10.85 billion against $US6.8 billion in 2017-18.
That suggests the company could report gross earnings close to $A6 billion or more. It has already paid 90 cents a share in dividends including the special 60 cents in early May.
Fortescue CEO Elizabeth Gaines said in yesterday’s statement the company achieved “exceptional results” across safety, production, costs, and delivery of its product strategy in the quarter.
“We have delivered record quarterly shipments of 46.6 million tonnes while reducing net direct cash costs by over five percent to $US12.78 per wet metric tonnes, reinforcing our position as the lowest-cost producer,” Gaines said.
Fortescue’s 2020 financial year shipments guidance is in the range of 170-175 million tonnes, including 17-20 million tonnes of West Pilbara Fines.
Its 2019-20 cash costs are expected to be between $US13.25-13.75 wet metric tonnes and total capital expenditure of $US2.4 billion.
