Monsters of Rock: Fortescue, Northern Star and all the other children disappointing you today

Fortescue fronts the market after big loss on FY24 results and FY25 guidance
Sandfire misses as well, Bellevue raises cash for expansion, Northern Star solid, Regis tanks on big 2025 guidance hit
Coal miner Coronado the only real excitement on a red day for mining and energy stocks

Few surprises Fortescue (ASX:FMG) exec chair and major shareholder Andrew Forrest wasn’t on the line for a conference call this morning, held a week after news hit the market that FMG had promoted a couple executives … and would chop 700 heads and abandon ambitious 2030 green hydrogen production targets.

Instead it was metals CEO Dino Otranto and energy head honcho Mark Hutchison holding the crying baby as FMG plummeted over 5% on a (shock, horror) guidance miss.

Fortescue shipped a record 53.7Mt in the June quarter and to come within inches of racing towards a guidance rate few analyst thought it would hit ahead of this morning’s results announcement.

That number ended up being 191.6Mt for FY24, just shy of guidance of 192-197Mt and last year’s record run rate.

Despite the opening of the Iron Bridge magnetite mine, that included 78.1Mt of Super Special Fines, a low grade blend that made up 41% of shipments in FY24 against 36% of shipments in FY23 and accounted for 28Mt or 52% of shipments in the June quarter.

That lift in lower grade tonnes saw realisations against the Platts 62% IODEX for FMG’s Hematite of 82% for the quarter at US$92.12/dmt, down from the US$111.82/dmt benchmark and shy of the 86% realisation across the financial year (US$103.01/dmt vs Platts index of US$119.48.dmt.

Iron Bridge, initially expected to deliver 5-7Mt in its maiden year, shipped 1.2Mt and hauled in average pricing of US$127.37/dmt in the fourth quarter, 101% of the 65% index of US$126.11/dmt.

1.3 of the 2.1Mt produced at the concentrate handling facility of the mine, expected to ramp up to 22Mtpa from next September, was delivered in the fourth quarter with shipments rising as moisture levels in the concentrate came down.

400,000t have left Port Hedland for Asia this month so far, with FMG guiding that 5-9Mt of the 190-200Mt it plans to ship in FY25 is likely to come from Iron Bridge.

C1 costs for hematite clocked in at US$18.53/wmt in the fourth quarter and US$18.24/wmt in FY24, but are expected to rise to US$18.50-19.75/wmt in FY25, with US$3.2-3.8bn to be spent on mining capex – US$700-900m on decarbonisation.

US$500m is to be spent on energy capex with another US$700m to go into green energy opex.

Projects on the go

Fortescue has four projects in focus including two sanctioned in Australia and Arizona, one in feasibility stage in Brazil and another in Norway. But Hutchinson said for the market to work green energy had to be in the US$30/MWh range or below green hydrogen to be competitive.

Otranto flagged that China could become a major source of demand for green hydrogen along with FMG’s iron ore, flagging plans for its coal power fleet to be 10% fuelled by green ammonia by the end of the decade.

Responding to questions about the job losses announced last week, Otranto flagged that much of the cost-savings were being made in corporate roles which transcended both the metals and energy businesses.

Aside from that, Gabon’s still going, Chinese customers like FMG’s ore and Fortescue Capital still exists. The hard news will emerge in the shake up, analyst reports, gossip rags and August’s full year financials.

It wasn’t just the quarterly report at play. 62% iron ore dropped below US$100/t in Singapore again today, with BHP (ASX:BHP) and Rio Tinto (ASX:RIO) also bleeding red, though more of a paper cut.

Want to know the machinations behind that? Check out this long read from Dalian correspondent and ASIO watchlist member Christian Edwards.

READ: A big bureaucratic machine is making sure iron ore stocks get sucked down under

Bellevue tips the cap

After months of speculation, Bellevue Gold (ASX:BGL) has reached out to the market, seeking $150 million via an underwritten institutional placement and $25m in an adjoining share purchase plan.

The idea is to pay down $120m in debt to free up cash flow and deliver $30-55m for exploration and development.

The deal will include a delay to principal repayments on debt to 2027 and the waiving of some debt covenants by Macquarie so BGL can invest in growth capex early.

The idea is to go big or go home, spending $60m on exploration in the next two years to hit an exploration target of 1.5-2.5Moz at 8-10g/t and increase underground ore movement from 1Mtpa to 1.6Mtpa in three years, matching rates at which an expanded processing plant would operate.

To some extent the release today was evidence again of the fact few new projects run to study spec, though inflation has clipped may a miner’s wing since BGL started building the Bellevue mine near Leinster in WA around the time of the pandemic.

It will produce 165,000-180,000oz at all in sustaining costs of $1750-1850/oz this coming year. Darren Stralow and team hope to increase output to 250,000ozpa at $1500-1600/oz in FY29 through economies of scale.

A 2021 DFS projected first five year costs of $922/oz. Different world of course.

Gold and copper on the bill

As is often the case Fortescue day is a good place for other companies to hide.

Sandfire Resources (ASX:SFR) (we had heard rumblings this may happen) missed guidance by 1.1%, delivering 133,500t in copper equivalent production from its MATSA and Motheo mines in FY 24.

That included 97,760t of copper, up 73% YoY. SFR was down 3.4%, but the ramp of Motheo to full scale rates in the next year has SFR confident the ASX’s largest pure play copper miner can deliver on its growth promises next year.

In the June quarter SFR produced 27.313t copper, 21,674t zinc, 1917t zinc and 1.2Moz of silver, all up strongly QoQ with group copper equivalent output 12% higher to 37,200t at C1 costs across MATSA and Motheo of US$1.54/t and US$1.56/t respectively, 28% and 9% better off.

SFR delivered US$360m in underlying group EBITDA before the auditors have their way with the numbers, and expects to see output lift 13% to 154,000t copper equivalent in FY25.

That will include 109,000t of copper metal (56,000t at MATSA and 53,000t at Motheo), 92,000t of zinc, 10,000t of lead and 4.8Moz of silver.

Meanwhile, we heard from Super Pit owner and Australia’s largest pure play goldie Northern Star Resources (ASX:NST), which hit guidance at 1.621Moz sold at an all in sustaining cost of $1853/oz, posting $462m in underlying free cash flow and $189m in a June quarter that saw stonking gold prices.

It has a lot of capital still to spend, with $950m-1.02bn set for FY25 including a whopping $500-530m building a new mill at WA’s big pit (fun fact: originally conceived by Alan Bond, though his house of cards came crashing down before he could cut the ribbon), and all in costs for FY24 came in at a still tidy $2750/oz relative to the gold price.

1.65-1.8Moz is planned in FY25 in the road to 2Moz in FY26, with all in sustaining costs flagged of $1850-2100/oz. Pogo in Alaska delivered a record quarter for Northern Star at 91,000oz, though the full financial year was disappointing at Yandal in the northern Goldfields.

However, RBC’s Alex Barkley viewed the report as a negative, saying guidance was soft against market expectations despite the final quarter of 439,000oz beating consensus by 6%.

Mid-tier goldies Regis Resources (ASX:RRL) and Alkane Resources (ASX:ALK) were also on the bill, though much of their big news has been reported. Regis investors through their toys out of the pram.

Regis was 5% below consensus with FY25 guidance and 13% above on costs, projecting 350,000-380,000oz at $2440-2740/oz with growth capex of $110-125m.

Regis produced 106,000oz in the June quarter and 417,700oz at $2286/oz for FY24.

Alkane set higher guidance of 70,000-80,000oz at $2400-2600/oz in 2025, with higher costs due to development of an underground decline at Tomingley. It has already stated growth plans at the mine, planning to turn out 455,000-505,000oz at $1900-2100/oz from FY25-FY29.

Tomingley produced 57,217oz at $2137/oz in the last financial year.

At the big end of town, Newmont delivered 1.61Moz for the June quarter at costs of US$1562/oz, delivering US$594m in free cash flow, while coal miner Coronado Global Resources (ASX:CRN) upped ROM coal production 23.8% to 7.4Mt and saleable production 21.5% to 4.1Mt, reducing costs quarter on quarter 27.5% to US$91.1/t at its Curragh (Queensland) and Buchanan (US) coal mines.

Price realisation improved to 80.4%, with average met coal selling prices hitting US$194.7/t, though that was 5% lower than the March quarter in absolute terms. CRN thinks Indian restocking will support met coal prices, which has come down thanks to stronger Australian supply post early 2024 weather issues and soft seaborne demand from the steel market.

Materials fell 1.57%, energy 1.8% as the market saw red.