Why is the Fortescue Mining (FMG) share price rebounding?

Posted: 28 April 2022 12:32 pm
News
FMG-shares-28April_1800x1000_Finder

Shares in the iron ore miner have jumped 49% over the last 6 months, although they've fallen on tougher times lately.

Shares in iron ore major Fortescue Metals Group (ASX: FMG) are the best performing among its mining peers and also among the top traded shares on the ASX on Thursday, with the share being up 4.4% to $20.99 at the time of writing.

Its momentum also seemed to have rubbed off on its big mining rivals, with BHP (ASX: BHP) up 3% and Rio Tinto (ASX: RIO) rising 2.5%.

What is pushing up the FMG stock price?

Some of the gains among the top miners can be attributed to the fact that the iron ore price seems to have stabilised around US$150 a tonne after days of sharp decline on fears of escalating lockdowns in the COVID-hit Chinese market.

But the latest jump in Fortescue shares comes after the world's fourth biggest iron ore miner outlined its production report for the March quarter on Thursday, which had some pretty encouraging numbers.

The company shipped 46.5 million tonnes (mt) of iron ore in the March quarter, a hefty 10% increase from a year ago, despite having previously warned that rising cost pressures and labour shortages in Western Australia could risk production.

That came ahead of analyst estimates and also resulted in shipments for the first 9 months of FY 2022 hitting a record high of 139.5 mt. It has allowed the company to lift its forecast for full-year shipments to between 185mt and 188mt, compared to the previous guidance of 180mt to 185mt.

Fortescue also commanded higher prices through the period, realising an average price of US$99.52 per dry metric tonne during the quarter. Some of this was offset by higher costs, as inflation across key inputs lifted C1 cash costs by 3% during the quarter to US$15.78 per tonne.

Cost pressures

Despite the encouraging March quarter numbers, Fortescue is facing rising cost pressures in different directions.

The miner has raised its annual costs guidance to US$15.75–US$16.00 per wet metric tonne from US$15.00–US$15.50 previously, reflecting higher crude oil price assumptions, supply chain disruptions exacerbated by the pandemic, sustained high inflation, and a prolonged Russia-Ukraine war. Bigger rivals BHP and Rio have also warned of similar risks.

At the same time, the miner has had to increase the capital expenditure estimate for its under-development Iron Bridge Magnetite project in Western Australia. The estimates construction cost is now expected to be between US$3.6 billion to US$3.8 billion, much higher than the originally estimated US$2.6 billion.

First production at the project has also been pushed back by 3 months to March 2023.

Still, outgoing CEO Elizabeth Gaines sounded a positive note on the company's performance:

"Against the backdrop of a record performance in our iron ore business and our focus on decarbonisation and green energy, Fortescue is well placed to finish the financial year strongly, as we continue to meet demand from our customers and deliver on our strategic priorities."

Serious about investing? Here's your new unfair advantage

Ticker Nerd uses advanced software to track hundreds of signals and data points to find stocks before they blow up. Don't miss out!
Get started for free

Considering buying mining shares?

If you are keen to buy shares in BHP, Rio Tinto or Fortescue, you can invest through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

Get more from Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site