The Fortescue Metals Group Limited (ASX: FMG) share price is edging higher this morning.
This follows the release of the mining giant's highly anticipated first quarter update.
At the time of writing, the Fortescue share price is up slightly to $14.08.
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Fortescue share price higher following Q1 update
The Fortescue share price has come under significant pressure in recent months following a sharp pullback in iron ore prices. Today's update has revealed just how greatly this decline has impacted its margins.
According to the release, Fortescue shipped 45.6 million tonnes of iron ore during the three months. This was up 3% on the prior corresponding period and a record for the first quarter.
However, the average revenue it commanded tumbled 30% quarter on quarter to US$118 per dry metric tonne (dmt). This represents revenue realisation of 73% of the average Platts 62% CFR Index, compared to 84% during the fourth quarter.
Positively, Fortescue's C1 cash costs were in line with the previous quarter at US$15.25 per wet metric tonne. This was driven by its focus on cost management to mitigate inflationary pressures.
Finally, in respect to its balance sheet, at the end of September Fortescue's net debt stood at US$175 million. While this is a deterioration from net cash of US$2.7 billion at the end of June, it is worth noting that the company paid final dividends totalling US$4.7 billion and capital expenditure of US$744 million during the quarter.
Management commentary
Fortescue's Chief Executive Officer, Elizabeth Gaines, said: "Across our operations, we achieved record first quarter shipments of 45.6 million tonnes and maintained our industry leading C1 cost of US$15.25 per wet metric tonne. Our C1 cost was in line with the previous quarter, reflecting our strong focus on cost management to mitigate inflationary pressures. Strong performance across the supply chain, together with the contribution of Eliwana continues to drive record operational performance."
"Fortescue's strategy to diversify continues to gain momentum with Fortescue Future Industries' (FFI) recent announcement to develop a renewable energy and green hydrogen manufacturing centre at Gladstone, Queensland as well as agreements with Incitec Pivot and Plug Power."
"We are committed to working with our customers, suppliers and other industry participants to facilitate the reduction of emissions, including technology development and the supply of green hydrogen and ammonia through FFI, with these initiatives enabling our commitment to achieve net zero Scope 3 emissions by 2040," she added.
Outlook
Fortescue has reiterated its guidance for FY 2022. It continues to expect iron ore shipments of 180mt to 185mt with C1 cost of US$15.00 – US$15.50/wmt.
Whereas capital expenditure (excluding FFI) is still expected in the range of US$2.8 billion to US$3.2 billion.
This guidance is based on an assumed FY 2022 average exchange rate of AUD:USD 0.75.
