The Fortescue Ltd (ASX: FMG) share price is under the spotlight after the ASX mining share reported its June 2024 update.
Fortescue is one of the largest iron ore miners in the world and it’s also working on a portfolio of green energy initiatives.
Fortescue’s June 2024 operational update
The mining company reported a strong quarter for its iron ore shipments, with 53.7 million tonnes in the FY24 fourth quarter, up 10% year on year. This led to total shipments of 191.6mt in FY24.
Fortescue said it achieved average revenue of US$92 per dry metric tonne (dmt) for the quarter, which was 82% of the average Platts 62% of CFR Index, while the average revenue for FY24 was US$104 per tonne. Fortescue’s lower-grade iron doesn’t earn as much as typical iron mined by some other companies.
Its C1 (mining) cost was US$18.53 per wet metric tonne (wmt) in the FY24 fourth quarter, while C1 costs were US$18.24 per wmt in FY24 overall.
The average revenue for the Iron Bridge concentrate was US$127 per dmt for the quarter, 101% of the average Platts 65% CFR Index, and average revenue of US$137 per dmt for FY24.
Earlier this month, the company announced a management and organisational update to simplify the company’s structure, remove duplication and deliver cost efficiencies. Improving underlying profit margins is normally a good thing for the (Fortescue) share price, as long as it doesn’t hurt long-term operational performance or company morale.
Balance sheet
The company reported strong cashflow generation contributed to a cash balance of US$4.9 billion and net debt of US$0.5 billion at 30 June 2024.
Fortescue spent US$2.9 billion on capital expenditure during the 2024 financial year.
Green energy
Fortescue continues to progress its initial four green hydrogen projects across Australia, the US, Norway and Brazil.
Additional projects in Morocco, Oman, Egypt and Jordan are expected to follow next.
The company noted the Pacem green hydrogen project in Brazil has been advanced to the feasibility phase, including commencement of the front end engineering design process.
It also revealed that the Fortescue-Actis consortium has been awarded rights to develop green hydrogen projects in Oman.
Fortescue also signed contracts for sale of the first electrolysers from its facility in Gladstone, Queensland.
During the quarter, the company signed a multi-year deal with JLR (Jaguar Land Rover) to use Fortescue’s cutting-edge battery intelligence software called Elysia in its next-generation electric vehicles.
Outlook for the Fortescue share price
The company is expecting iron ore shipments of between 190mt to 200mt, including 5mt to 9mt from Iron Bridge. It shipped 191.6mt in FY24, so Fortescue is expecting a range of possible outcomes between a slight decline to a rise of up to 4.4%.
The C1 mining cost is expected to be between US$18.50 to US$19.75 per wmt.
Fortescue’s short-term success is largely down to what happens with the iron ore price, which is unpredictable and relies on China. I wouldn’t say it’s a great time to buy Fortescue, I’d rather invest when there is real fear in the resource market and the Fortescue share price has dropped to a cyclical low, which I wouldn’t describe it as (yet), though it is getting cheaper. I’d want to see the valuation fall below $20 per share to consider buying for the potential of a market-beating performance.
There are other ASX dividend shares I’d rather buy first.
