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Fortescue (ASX:FMG) share price rises on December 2023 quarter performance

The Fortescue Metals Group Ltd (ASX: FMG) share price is up more than 1% after its December 2023 update.

Fortescue is a major iron ore miner and also has ambitions to be a major producer of green hydrogen.

Strong December performance

Fortescue said it shipped a total of 48.7 million wet metric tonnes (wmt), down 1% year over year, but up 6% compared to the first quarter of FY24. This led to total shipments of 94.6mt in the FY24 first half, down 2% year over year.

A few issues

An ore car derailment occurred on Fortescue’s mainline in the Pilbara on 30 December 2023 due to a “heat buckle”. There were no injuries, and rail operations resumed on 3 January 2024.

Iron Bridge commissioning activities “continue to progress well”. A second shipment of Iron Bridge concentrate was achieved in the second quarter of FY24 and three shipments in January 2024.

While performance of the Canning Basin raw water pipeline improved relative to the prior quarter, further leaks were detected the second quarter of FY24 which “impacted the flow rate and uptime”. It’s working on ways to improve the performance, and replacing this section of pipeline “would not materially impact Iron Bridge’s ramp-up schedule” and would require investment of approximately US$100 million for Fortescue.

Iron Bridge shipment guidance has been revised to 2mt to 4mt, down from 5mt. Fortescue’s share of Iron Bridge FY24 operating expenditure excluding shipping and royalties is expected to be between US$200 million to US$400 million, compared to previous guidance of US$400 million.

Some good areas of the quarter helping the Fortescue share price

It said it received average revenue of US$116.18 per dry metric tonne (dmt), which means the business is making strong revenue for its production.

Fortescue also said in its energy division it achieved a final investment decision (FID) on the Phoenix hydrogen hub in the USA and the Gladstone PEM50 project in Queensland.

It also launched Fortescue Capital, a “green energy investment accelerator platform”.

Fortescue revealed priority green projects selected to be fast-tracked by Fortescue’s board include Pecem in Brazil, project Chui in Kenya and Holmaneset in Norway.

The European Union awarded Homaneset a grant of €204 million as part of its innovation fund. The planned green ammonia project aims to capitalise on the surplus renewable energy from the Norwegian transmission grid.

It has also reached a final investment decision of an investment of up to US$50 million to construct a green iron trial commercial plant at the Christmas Creek mine site that will use green hydrogen and renewable energy.

The business finished December with US$4.7 billion at 31 December 2023, up from US$3.1 billion at 30 September 2023. Net debt was US$0.6 billion at December 2023, it improved from US$2.2 billion at 30 September 2023.

Final thoughts on the Fortescue share price

The Fortescue share price has risen 24% over the past six months and it’s close to its all-time high. It’s benefiting from the higher iron ore price and investing for growth in green energy.

But, I don’t think it’s the right time to invest because of the bullishness about iron. I’d prefer to invest when times are weak, even if that’s uncomfortable to do so at the time.

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