The Fortescue Metals Group Limited (ASX: FMG) share price is up after delivering a record first quarter, for the three months to 30 September 2021.
Fortescue’s huge FY22 Q1
The iron ore miner said that it achieved iron ore shipments of 45.6 million tonnes (mt), which was 3% higher than the first quarter of FY21 and a record for a first quarter.
In terms of revenue, it achieved average revenue of US$118 per dry metric tonne (dmt), representing a revenue realisation of 73% of the average Platts 62% CFR Index and contractual realisation of 77%. This reflects the ‘lower’ grade iron that Fortescue produces and how it compares to a ‘benchmark’ price of iron ore.
The C1 cost of US$15.25 per wet metric tonne (wmt) was in line with the previous quarter.
In terms of the balance sheet, Fortescue said that it had net debt of US$175 million at 30 September 2021 after paying the FY21 final dividend of US$4.7 billion and capital expenditure of U$744 million in the quarter.
Management comments
The CEO of Fortescue, Elizabeth Gaines, said that its C1 cost staying in line with the previous quarter reflected its strong focus on cost management to mitigate inflationary pressures. This is helpful for the Fortescue share price. She also said:
“Fortescue’s strategy to diversify continues to gain momentum with Fortescue Future Industries’ (FFI) recent announcement to develop a renewable energy and green hydrogen manufacturing centre at Gladstone, Queensland, as well as agreements with
Incitec Pivot Ltd (ASX: IPL) and Plug Power.
Ms Gaines also talked about how the company has committed to zero scope 3 emissions by 2040 by working with customers, suppliers and other industry participants to facilitate the reduction of emissions, including technology development and the supply of green hydrogen and ammonia through FFI.
Outlook for Fortescue and the share price
Fortescue is expecting iron ore shipments of between 180mt to 185mt for FY22, with a C1cost of between US$15 to US$15.50 per wmt. Capital expenditure, excluding FFI, is expected to be between US$2.8 billion and US$3.2 billion.
The iron ore miner continues to produce enormous amounts of iron ore, and it’s making rapid progress with various initiatives with FFI. If Fortescue can become a powerhouse in the global green space, then it could significantly diversify the business and profit.
I would be happy to buy a parcel of Fortescue shares today considering how much the Fortescue share price has fallen in recent months. However, difficulties in the Chinese real estate market could cause more volatility, but for my portfolio I could consider that an opportunity.
