The Fortescue Metals Group Ltd (ASX: FMG) share price has climbed 26% over the past year. So I'm going to look at whether it's going to be another really positive year for the ASX mining share.
To start with, it's important to acknowledge that almost all of Fortescue's earnings come from iron ore, so whatever happens with the commodity price could significantly impact whether FY24 is going to be positive or not. So, let's start by looking at some iron ore price thoughts.
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Will iron ore factors support the Fortescue share price?
I'm not an expert on where the iron ore price is going to go, though not many people can say they're accurate forecasters most of the time.
The iron ore price does seem to go through cycles, and at the moment it's sitting at around US$115 per tonne.
There are many different forecasts out there, such as the 2024 forecast from Goldman Sachs that suggests the iron ore price could be US$93 per tonne, though it has proven sometimes to be too pessimistic in the past.
If the iron ore price remains above US$100 per tonne, or even US$110 per tonne as it is now, then Fortescue could continue to make very good profits.
In the first half of FY23, Fortescue achieved average revenue of US$87 per dry metric tonne, representing an 86% realisation of the Platts 62% CFR Index (because the grade/quality of Fortescue's iron ore is typically lower than what's sold by its mining peers).
With that iron ore price, Fortescue generated US$2.37 billion of net profit after tax (NPAT), $1.57 billion of free cash flow, A$1.15 of earnings per share (EPS) and paid an interim dividend per share of 75 Australian cents.
In the three months to 31 March 2023, it achieved average revenue of US$109 per dry metric tonne of iron ore.
The company's Iron Bridge project is now operational, which is a higher grade and can help Fortescue achieve stronger earnings and cash flow.
While China's economy is not yet firing on all cylinders, Chinese steel exports are hitting a seven-year high thanks to demand from Africa and Asia. High energy prices in other countries are making Chinese steel prices relatively attractive, according to Reuters reporting. Chinese steel exports could help maintain the current iron ore price.
Green energy
The Fortescue Future Industries (FFI) division continues to make good progress. In FY24, its goals could be much closer.
In the three months to 31 March 2023, it said that construction works had been completed at the electrolyser facility at Gladstone, Queensland. It's now further fitting out the facility, including an automated production line and testing facilities.
The company is working on a number of projects, so it will be interesting to see which one starts producing green hydrogen/green ammonia first, but it's advancing the Norwegian Holmaneset project, the Kenya project, and the Gibson Island project in Queensland, among others.
Ongoing progress for these projects, and its high-performance battery division, could help support the Fortescue share price as investors see that it's getting closer to generating material earnings.
Foolish takeaway
If Chinese demand for iron ore holds up, then this could lead to good profit and dividends from Fortescue, which in turn could be very helpful for Fortescue shares. As the green energy division gets closer to producing green hydrogen, this could also be supportive.
