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Report Just In, Could Fortescue’s (FMG) Dream Run Soon Be Over?

The dream run from Fortescue Metals Group Limited (ASX:FMG) shares could soon be over, despite a promising quarterly report.

Australia’s third-largest iron ore miner Fortescue Metals Group Limited (ASX: FMG) has just released its third-quarter production report.

Since it was founded in 2003, Fortescue has developed into one of the largest iron ore miners in the world, now producing 170 million tonnes of iron ore per annum.

Quarterly Report

Fortescue’s March quarterly production highlights included:

  • Total shipments of 38.3 million tonnes of iron ore
  • Cash production costs of US$13.51 per wet metric tonne
  • The average price received for their ore was US$71 per dry metric tonne, 47% better than the US$48 per tonne they received in the December quarter

The impact of recent Tropical Cyclone Veronica was limited to 2.5 million tonnes of ore due to the closure of Port Headland for five days.

FY19 Guidance

Fortescue outlined their full-year guidance in the quarterly, which showed:

  • 165-170mt in shipments, inclusive of West Pilbara Fines product of 8-10mt
  • C1 costs expected to be between US$13-13.50/wmt
  • Average strip ratio of 1.5
  • Total capital expenditure of US$1.2 billion, inclusive of Fortescue’s share of the Iron Bridge Magnetite Project for FY19
  • Depreciation and amortisation of US$7.10/wmt

Fortescue will report their FY19 results on 26 August 2019.

The Vale Impact

The share prices of Fortescue and fellow miners BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) got whacked yesterday following the quarterly report from BHP and the announcement that Brazilian miner Vale has been allowed to restart production at its Brucutu iron ore mine following the fatal mine disaster earlier this year.

Are Fortescue Shares A Buy?

Fortescue’s quarterly production numbers were strong. However, while it is in the enviable position of having large iron ore production and low costs, short term traders may want to lock in profits.

The Fortescue share price has been on a tear since the Vale mining disaster on 25 January, when the share price was $4.70. Its up 57% since then, so the good ride could be over, for now.

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At the time of writing David does not have a financial interest in any of the companies mentioned.

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