FMG Results: New record in sight for Fortescue as Iron Bridge, Gabon ramp up

Results show demand for its lower grade, discounted hematite iron ore remains solid
Guidance for FY24 is for total shipments in the range of 192-197 million tonnes
Exploration, studies ramped up year on year from US$194m to US$233m in FY23

Fortescue Metals Group (ASX:FMG) has delivered the top end of its 2023 guidance, establishing a new shipping record in its Pilbara iron ore business of 192Mt, a 2% lift on FY22.

And it will look to do it again next year with the ramp up of its new Iron Bridge magnetite mine, which shipped first concentrate on July 24, to add 7Mt to its output of 192-197Mt in FY24 at a (hematite) cost of US$18-19/wmt.

The first ore from Fortescue’s Gabon mine, Belinga, has also been dug and transported to Libreville to prepare for shipment later this year. A small scale operation is being established as drilling begins at what FMG thinks is a high grade orebody similar in nature to Rio Tinto’s 65% Fe Simandou mine in Guinea.

Fortescue, which has been in the headlines recently for its founder, chairman and major shareholder Andrew Forrest’s separation with his wife Nicola, something it has insisted will have no impact on the ownership structure of the company, shipped 48.9Mt at a C1 cost of US$17.57/wmt in the June quarter.

On a full year basis that’s US$17.54/wmt, well below initial guidance of US$18-18.75/wmt, but 10% higher than the US$15.91/wmt C1 cost in FY22.

The results come as the company celebrates its 20th anniversary, which will usher in a rebranding to Fortescue, with its mining business to come under the title of Fortescue Metals and battery tech arm Williams Advanced Technologies and green energy business Fortescue Future Industries to be run as Fortescue Energy.

Demand remains strong

The introduction of Iron Bridge, a mine producing a 67-68% pure magnetite concentrate, is geared for the steel industry’s shift to lower emissions milling technology and is expected to ramp up to its full 22Mtpa runrate in two years.

But Fortescue’s results show demand for its lower grade, discounted hematite iron ore remains solid.

It sold its cargo at a price of US$96.34/dmt in the June quarter, an 87% realisation of the Platts 62% CFR Index, with revenue of US$94.74/dmt across the year coming in at 86% of the benchmark.

Fortescue Metals CEO Fiona Hick said the first production at Iron Bridge marked an entry into the new high grade segment of the market.

“Fortescue recently celebrated several milestones, including first magnetite concentrate production from Iron Bridge. Iron Bridge is a large and complex project, and its successful construction is a true demonstration of our values. I want to thank everyone who has been involved. It signifies Fortescue’s entry into the high grade iron ore market segment which enables us to provide our customers with an enhanced product offering,” she said.

“The Belinga Iron Ore Project in Gabon continues to make strong progress with the first ore loaded on train and delivered to port during the quarter, less than six months from when the Mining Convention was signed. Geological mapping and sampling programs continue to show that this project has the potential to be significant scale and high iron grade, and we have a major exploration drilling campaign underway.

“Building on another year of record performance, our guidance for FY24 is for total shipments in the range of 192-197 million tonnes. Our hematite operations are performing strongly and we are focused on delivering growth through the safe and efficient ramp up of Iron Bridge, unlocking the potential of Belinga and decarbonising our iron ore operations.

“We will continue to invest in green metals, green energy and green technologies, supported by our strong balance sheet and disciplined capital allocation.”

FMG expects to spend US$2.8-3.2b on capex in FY24, including US$1.9-2.1b on sustaining capital and hub development, US$300m on exploration and studies, US$300m on Iron Bridge and Belinga and US$300-500m on decarbonisation initiatives, while FFI will take up US$400-500m of opex and US$300m of capex.

Exploration spending ramps up

Fortescue’s investment in exploration and studies ramped up year on year from US$194m last year to US$233m in FY23, with iron ore exploration focused on resource definition drilling at the Nyidinghu and Mindy South projects.

Outside drilling in iron ore, which included at Belinga, FMG has been exploring for other metals including lithium and copper, with the company placing a focus on target generation at its copper assets in South Australia where drill testing is planned for the second quarter.

It also has drilling programs internationally across Argentina, Chile, Brazil and Kazakhstan.