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Fortescue Metals Group Ltd FMG Stock Quote

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Morningstar‘s Stock Analysis FMG

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Fortescue’s Fiscal 2023 First-Quarter Sales as Expected, AUD 12.50 FVE Retained

Jon Mills, CFA Equity Analyst

Analyst Note

| Jon Mills, CFA |

No-moat Fortescue shipped about 48 million tonnes of iron ore in the first quarter of fiscal 2023, in line with our estimates and 4% higher than the previous corresponding period, or pcp. Fortescue’s generally lower-grade ore (around 57% to 58% iron content) means it incurs a discount to the 62% benchmark price. The company’s average realised price was USD 87 per tonne, down from USD 118 in the pcp, but this was partially offset by Fortescue incurring a lower discount, which fell to 15%, down from 27% in the pcp. Discounts tend to shrink when steelmaking margins contract, as has happened. Then steel mills act to minimise costs by using cheaper lower-grade iron ore, rather than maximising steel volumes by using higher-grade iron ore as when steelmaking margins are high. Iron ore prices have fallen recently due to concerns over the Chinese economy and slowing steel demand.

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Company Profile FMG

Business Description

Fortescue is an Australia-based iron ore miner. It has grown from obscurity at the start of 2008 to become the world's fourth-largest producer. Growth was fuelled by debt, now repaid. Expansion from 55 million tonnes in fiscal 2012 to about 185 million tonnes in 2022 means Fortescue supplies nearly 10% of global seaborne iron ore. Further expansion above 200 million tonnes is likely once it completes construction of its 22 million tonne Iron Bridge magnetite mine. However, with longer-term demand likely to decline as China's economy matures, we expect Fortescue's future margins to be below historical averages. More recently, Fortescue has diversified into green energy, with ambitions to become a major supplier of green hydrogen and green ammonia. Its efforts here are at an early stage.

87 Adelaide Terrace, Level 2, East Perth
Perth, WA, 6004, Australia
T +61 862188888
Industry Other Industrial Metals & Mining
Most Recent Earnings
Fiscal Year End Jun 30, 2023
Employees 3,898