Could this be it? Could we have seen the end of the downward trajectory of the Fortescue Metals Group Limited (ASX: FMG) share price?
Fortescue's share price has been on an absolute tear since September 29, rising nearly 35% in 14 sessions from $1.66 to within touching distance of the company's six-month high of $2.58.
What's happened?
Well the rise certainly hasn't been due to the iron ore price staging a remarkable comeback, the price remains hovering around the US$50 per tonne mark, and the rumoured asset sales that saw Fortescue's share price spike earlier in the year haven't materialised yet.
The start of a turnaround?
Fortescue's September quarter production results were well ahead of expectations from a cost-cutting perspective and investors were please by the amount of debt repaid in the quarter.
The miner's C1 costs (a unit of measure good for comparison between quarters) fell to US$16.90 a tonne, from US$22.16 a tonne at the end of the June quarter, and amazingly, nearly US$44 a tonne back in 2012.
Fortescue was also able to realise higher prices, or lower discounts, on its low-grade iron ore shipments. Fortescue's discount to the Platts price benchmark index was 9%, below the 10% to 15% discount it's known for.
All good news?
The operational report was pretty much all good news for Fortescue investors, but the real test is coming.
Rivals Rio Tinto Limited (ASX: RIO), BHP Billiton Limited (ASX: BHP), Vale and Gina Rinehart's 55 Mtpa Roy Hill mine should all bring on new production in the next 12 months, further increasing supply at a time when demand is historically low.
Should you Buy or Hold?
I'm certainly not buying shares after the recent 34% surge, however I remain a holder as I believe long-term Fortescue will remain an important part of the Australian mining industry.
The form that the company takes is still up in the air in my opinion, perhaps as an operational company where assets are held by foreign investors, or maybe in an iteration of its current format.
