Why is the FMG share price surging today?
Shares in mining giant Fortescue Metals have climbed 6% in the last 12 months.
Fortescue Metals Group (ASX: FMG), a market favourite, is among the top traded shares on Monday. It is also among the top gainers, leading a broad rebound in mining shares. At the time of writing, Fortescue shares were up 6.4% at $21.27, their biggest daily increase in nearly 4 months.
Why is the FMG stock price rebounding?
Australia’s third largest iron ore miner on Monday declared its highest ever annual profit, at US$10.3 billion, and a 117% rise on the previous year. It also reported a 74% lift in revenue for the 12-month period to US$22.3 billion.
The strong results have allowed the company to shower rewards for its shareholders. It will deliver a fully franked final dividend of $2.11 a share, bringing the total payout to $3.58 a share for the year, or near the top end of the company’s guidance of returning 50-80% of net profits to investors.
The overall result was underpinned by the miner’s highest-ever annual shipments of 182.2 million tonnes as well as a surge in iron ore prices in the last few months of the financial year.
Fortescue realised average revenue of US$135 per dry metric tonne, a surge of 72% on FY20, and the company also reaffirmed its disciplined cost management, with industry-leading C1 cash production costs of US$13.93 per wet metric tonne.
Promising outlook
Like its peers, Fortescue Metals has gained from a sharp run-up in iron ore prices between April and July this year, when the steel-making ingredient largely stayed above US$200 a tonne. With demand moderating in China, prices have since eased and overnight traded at US$159 a tonne.
Despite this, it is expected to remain a beneficiary of prices remaining well above US$100 a tonne. Fortescue has outlined an export guidance of 180 to 185 million tonnes for the current fiscal year ending June 2022, near its record shipments in FY21.
The company has also set up Fortescue Future Industries to invest in a global green hydrogen and renewable energy portfolio as part of its decarbonisation strategy. It expects to spend up to $600 million on the venture in fiscal 2022.
“Through the Iron Bridge Magnetite project and Fortescue Future Industries, we are investing in the growth of our iron ore operations, as well as pursuing ambitious global opportunities in renewable energy and green industries,” Fortescue CEO Elizabeth Gaines said.
That could mean gains for the stock, which is up just 6% over the past 12 months.
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