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Fortescue (ASX:FMG) share price rises as production grows in Q1

The Fortescue Metals Group Limited (ASX: FMG) share price is up around 1% after delivering its FY23 first quarter update.

Fortescue’s FY23 first quarter

The business has already told investors about some of the things that happened during the last few months such as its multi-billion decarbonisation plan and its plan to invest in a green hydrogen import terminal in Europe.

In this article I’m going to focus on the mining side of the business.

It said that iron ore shipments for the quarter were 47.5 million tonnes (mt), which was 4% higher than the prior comparable period and a record for a first quarter.

Average revenue for the quarter was US$87 per dry metric tonne (dmt), which was 85% of the average Platts 62% CFR Index. That measure shows how much of a discount there was for Fortescue’s lower grade iron ore.

The C1 costs, the mining-related costs of the business, were US$17.69 per wet metric tonne (wmt). This was 3% higher than the previous quarter. It said it’s focused on mitigating industry-wide cost pressures, including fuel costs.

Fortescue said that it had US$3.3 billion cash at 30 September 2022, though it had a net debt position of US$2.8 billion at the end of the quarter (which means it has a few billion more debt than cash).

FY23 guidance was unchanged. Iron ore shipments are expected to be between 187mt to 192mt, with approximately 1mt from Iron Bridge. C1 costs are expected to be between US$18 per wmt to US$18.75 per wmt in this financial year. These are key statistics that can impact the Fortescue share price, aside from the iron ore price.

Management comments

The Fortescue executive Chair Andrew Forrest said:

Fortescue is leading the green energy transition and setting record-breaking industry benchmarks. We are establishing the building blocks of a new, global renewable energy value chain spanning technology, manufacturing, green energy generation and distribution which will deliver significant returns to our shareholders.

Last month at the United Nations General Assembly, Fortescue announced it would step beyond
fossil fuels and lead heavy industry to achieve real zero emissions (Scope 1 and 2) across our iron ore operations by 2030. We will save an estimated US$3 billion by 2030 as a result, rising to annual
savings of US$818 million once fully implemented. Our roadmap outlines the technology, timetable,
strategy and costings required to decarbonise profitably, avoid financial, commercial,
environmental and social risk, and future-proof the business. We urge other emitters like us to
follow.

Final thoughts on the Fortescue share price

Fortescue’s production continues to be impressive. Compared to the guided costs, the costs it reported were largely what were expected. I’m not really surprised to see that the share price is up a little today.

I’m impressed by the progress that Fortescue is making with its green hydrogen efforts. Investing in an green hydrogen import terminal seems like a smart move.

Hopefully Fortescue can get its green hydrogen operations up and running as soon as possible, to help diversify earnings and bring the other benefits that green hydrogen will bring to the world.

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At the time of publishing, Jaz owns shares of Fortescue.
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