Fortescue Metals Group adds $US3.3bn cash ahead of bonanza iron ore dividend season
Fortescue finished June with $9.4bn in the bank, paving the way for a bonanza payout to shareholders including Andrew Forrest.
Fortescue Metals Group shares hit record highs on Thursday in anticipation of a bumper dividend after the company closed the financial year with a flourish, finishing June with $9.4bn in the bank.
Fortescue released its June quarter production report on Thursday, saying it closed the financial year with a net cash position of $US2.7bn ($3.6bn), after adding $US3.3bn to its cash balance in the June quarter alone as the company sailed to the close of the financial year with strong quarterly shipments of 49.3 million tonnes of iron ore from its Pilbara operations.
Fortescue shares touched a record high of $26.50 in intraday trading on Thursday, before closing at $26.30, up 1.90 per cent, as investors positioned ahead of what is expected to be a bonanza dividend season from Australian iron ore miners.
Fortescue’s June quarter shipment figure was up 17 per cent on a weather affected March period, and put the company marginally ahead of the top end of its annual export guidance of 180 million tonnes.
Fortescue chief executive Elizabeth Gaines said in a statement record shipments and prices had combined to deliver an outstanding year for the iron ore miner.
“The strength of the operating performance, combined with record average revenue resulted in strong free cashflow generation in the June quarter as demonstrated by the movement from a net debt position at the end of March of $US1.0bn to net cash of $US2.7bn at 30 June,” she said.
Fortescue received an average price of $US167.95 a dry metric tonne for the June quarter, also up 17 per cent compared to the March period, or about 84 per cent of the average benchmark price of $US200.01 a tonne.
Its average cash cost of production also rose in the period as the costs of guarding against the pandemic and skills shortages in WA lifted operating costs across the industry.
Fortescue said its production cost averaged $US15.23 a wet metric tonne in the June quarter, up 2 per cent for the period. Across the full financial year its costs averaged $US13.93 a tonne.
“Productivity gains through innovation and technology remain a focus to mitigate mine plan cost escalation, materials and consumables inflation and a strong labour market,” the company said.
The iron ore major again lifted its export guidance for the current financial year, saying it expected to ship 180 to 185 million tonnes in the full year to the end of June 2022.
Fortescue won’t deliver its annual financial results until August 30, but the company has a policy of paying out 50 per cent to 80 per cent of full-year net profits after tax, targeting the top end of that range.
Chinese steelmaking giant Baowu has exited Fortescue’s Iron Bridge magnetite project, however.
Baowu was an early partner in the Iron Bridge project, and held 12 per cent of FMG Magnetite, which holds 69 per cent of the project.
Fortescue said on Thursday that Baosteel no longer held a stake in the project or FMG Magnetite.
Ms Gaines told reporters the Chinese steelmaker’s share in the project was diluted as Fortescue and joint venture partner Formosa kept spending on its construction, and Fortescue had picked up Baowu’s remaining stake for an “immaterial” sum.
In May Fortescue upped its estimate of the cost of Iron Bridge by as much as $US900m ($1.17bn) in the wake of a full-scale review of the cost and progress of the major construction project, saying it now expects Iron Bridge to cost $US3.3bn to $US3.5bn to complete, up from a $US3bn estimate in February and an original cost of $US2.6bn when it was approved in 2019.
