Might the Fortescue Metals Group Limited (ASX: FMG) share price be worth considering after falling by 44% in three months.
The iron ore mining giant recently revealed its FY22 first quarter to the market which included a number of updates.
After looking at those updates, brokers then had their say on the Fortescue share price.
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Iron ore operations
Fortescue revealed that its first quarter iron ore shipments of 45.6 million tonnes (mt) were 3% higher than the first quarter of FY21, which was a record for a first quarter.
The business experienced average revenue of US$118 per dry metric tonne (dmt), representing a revenue realisation of 73% of the average Platts 62% CFR Index and contractual realisation of 77%.
Looking at the costs, the C1 cost was US$15.25 per wet metric tonne (wmt), which was in line with the previous quarter. However, it was 20% higher year on year due to a higher exchange rate, cost growth (including diesel and labour rates), integration of the new mining hub at Eliwana and mine plan driven cost escalation.
Its guidance for FY22 shipments, C1 cost and capital expenditure remained unchanged. As a reminder, the iron ore shipments are guided to be between 180mt to 185mt, C1 cost guidance is between US$15 per wmt to US$15.50 per wmt and capital expenditure is expected to be between US$2.8 billion to US$3.2 billion.
The Iron Bridge project is scheduled for first production for December 2022. The forecast capital investment is unchanged at US$3.3 billion to US$3.5 billion, with Fortescue's share being between US$2.5 billion to US$2.7 billion.
Fortescue Future Industries (FFI)
The green arm of Fortescue is getting a lot of the headlines and attention at the moment. It has a goal of taking a global leadership position in the renewable energy and green products industry and has a vision to make green hydrogen the most globally traded seaborne commodity in the world. At the moment, brokers like Ord Minnett do not attach any value of FFI to the Fortescue share price.
It is a key enabler of Fortescue's decarbonisation strategy, including Fortescue's recently announced target of achieving net zero scope 3 emissions by 2040. To reduce scope 3 emissions, FFI's plan is to develop projects and technologies that reduce emissions during the process of iron and steel making, and work with current and prospective customers to use technology and supply green hydrogen and ammonia from FFI.
FFI also announced the construction of a global green energy manufacturing centre in Gladstone, Queensland. The first stage development is an electrolyser factory with an initial capacity of two gigawatts.
Fortescue Future Industries also made a partnership with Incitec Pivot Ltd (ASX: IPL) to conduct a feasibility study to convert the Gibson Island ammonia production facility in Queensland to run on green, renewable hydrogen.
Finally, it acquired a 60% equity interest in the Dutch-based High-yield Energy Technologies (HyET) Group.
Broker opinions on the Fortescue share price
There are some polar opposite opinions on Fortescue.
For example, Morgan Stanley thinks Fortescue is still a sell/'underweight' despite the decline. The price target is $12.50. A core part of that estimate relates to the broker's thoughts that Fortescue's iron ore could be discounted compared to higher grade ore. The broker puts the Fortescue share price at 9x FY23's estimated earnings.
Meanwhile, there's a broker like Ord Minnett that has a price target of $22 on Fortescue, with a belief that China is going to recover from the current problems it's having. Based on this broker's projections, the Fortescue share price is valued at 8x FY23's estimated earnings.
