Shares of the ASX-listed Fortescue Metals Group Limited (AU:FMG) fell as rising cost pressures overshadowed the company’s record iron ore shipments in Q1 FY25. Total iron ore shipments reached 47.7 Mt (million tonnes), marking a 4% increase compared to Q1 FY24 and setting a record for the first quarter. However, the company faced rising costs at its mines due to inflationary pressures. FMG shares fell 3.29% as of writing.
Don't Miss our Black Friday Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Fortescue is an Australian mining company focused on iron ore and green energy.
Fortescue’s Q1 Iron Ore Success Clouded by Cost Challenges
Fortescue’s success in Q1 was primarily fueled by its Iron Bridge project in the Pilbara region of Western Australia, which contributed 1.6 Mt. The project is expected to reach full production capacity by 2025.
Despite achieving a record number, the iron ore shipments marked an 11% decline from the previous quarter. This indicated a significant slowdown in shipments.
Additionally, the rising production costs remain a pain area for the company, bringing down the realized prices. The company’s production costs for wet tonnes of hematite ore rose 12% during the quarter, reaching $20.16. This was mainly attributed to a higher strip ratio and inflationary pressures during the quarter. The strip ratio is a measure used in mining that indicates how much waste material needs to be removed to obtain a certain amount of valuable ore.
As a result, realized prices dropped to an average of $83 per dry metric ton (dmt) in the quarter, down from $100 a year ago.
Fortescue Confirms FY25 Guidance
For the full-year Fiscal 2025, Fortescue confirmed its iron ore shipment forecast between 190 and 200 Mt. It shipped 191.6 Mt of iron ore in FY24. Moreover, it projects cost between $18.50 and $19.75 per wet ton for FY25.
Is FMG Stock a Good Buy?
According to the TipRanks consensus, FMG stock has received a Hold rating based on five Hold, four Sell, and three Buy recommendations. The average Fortescue share price target is AU$19.45, which is 1.64% above the current trading levels.
