Fortescue (ASX:FMG) shares fall after its 3Q23 report

Nick Sundich, April 28, 2023

Fortescue Metals (ASX:FMG) shares fell by 5% this morning after the company’s 3Q23 production report. This was despite record iron ore shipments and the company hitting several operational milestones.

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FMG’s shipments are growing

FMG’s Q3 Iron-Ore exports were steady at 46.3Mt, with the company having been spared damage from Cyclone Isla. And lower commodity prices would be offset by the weaker Australian dollar. On a YTD basis, it has shipped 143.1Mt, a record for the company and one that could increase further as China re-opens.

It achieved average revenue of US$109 per dry metric tonne (dmt) of iron. And it reiterated its guidance of 187-192mt iron ore shipments, US$2.7-$3.1bn capex (excluding FFI). But shares fell by more than 5% in morning trading.

Fortsecue (ASX:FMG) share price chart, log scale (Source: TradingView)

Costs are growing too

Despite the good news, there was some bad news out of FMG as well. Ores mined fell by 16% quarter-on-quarter and ores processed fell by 8% – with sales only being spared because of ores mined in the previous quarter. C1 costs were US$17.73 per wet tonne, up 12% year on year and 2% higher than Q2. And investors anticipate more to come given the company’s hydrogen ambitions.

Some investors may be tempted to look at FMG given the high dividend paid out in FY22. But we think this is unlikely to last if costs keep growing and iron ore prices stagnate (let alone continue to fall after reaching record levels in 2020-21).