Challenges abound for the resources space at the moment, as was attested by the flat performances of two local majors in this past quarter, Fortescue
(ASX:FMG) and South32
(ASX:S32).
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Even though it had a flat three months, Fortescue Metals Group
(ASX:FMG) became the world’s third biggest iron ore shipper by volume in the three months to March.
FMG overtook Brazil’s Vale which saw its exports slump more than 10% quarter on quarter.
FMG on Monday posted third-quarter iron ore shipments that were little changed from the prior year period, amid a slight drop in mined ore during the period.
The company said it shipped 46.3 million tonnes of iron ore in the three months ended in March 2023, and just under the 46.5 million tonnes shipped in the March quarter of 2022.
Vale said its iron ore sales though fell 10.6% from the March, 2022 quarter to 45.86 million tonnes but it was also a massive 43.5% under the December, 2022 quarter.
The flat March quarter performance saw Fortescue’s 9-month production hit a record 143.1 million tonnes though. That left the company on track to meet its June 30 full year shipment guidance of 187 to 192 million tonnes (189 million tonnes in 2021-22).
FMG’s performance was flat over the quarter, like BHP’s was and simply underlined the surprise of the outperformance by Rio Tinto in the quarter.
Rio’s Pilbara iron ore business produced 79.3 million tonnes and shipped 82.5 million tonnes in the three months to the end of March, up 11% and 16% respectively. It left its guidance for the year steady at 320-335 million tonnes.
BHP said last week it could only manage flat shipments for the quarter of 66.5 million tonnes (on a 100% basis which includes output shares for partners in some mines). That was the weakest first quarter performance in years.
BHP left its 2022-23 (June 30) production guidance steady at 278-290 million tonnes (on a 100% basis) and 246 to 256 million tonnes for its West Australian Iron Ore operations)
Fortescue reported higher costs for the quarter on a year earlier – its C1 cost of $US17.73/wet metric tonne (wmt), 2% higher than December half year. But 2021’s figure was $US15.91 a dwt
Net debt of US$2.1 billion at 31 March 2023, after payment of the interim dividend of US$1.5 billion and capital expenditure of US$681 million in the quarter. the net debt figure is under the $US2.4 billion a year earlier.
Fortescue CEO Fiona Hick said in a statement that it was “another strong quarter for our core iron ore business which is a credit to the team and demonstrates our continued focus on safety, production and cost.
“On the Iron Bridge Magnetite Project, I am pleased to report that the first wet concentrate was produced on Friday. The team is very focussed on the safe commissioning and production ramp up.
“This is a significant milestone for Fortescue as Iron Bridge represents our entry into the highest-grade segment of the iron ore market, providing an enhanced product range while also increasing production and shipping capacity. It demonstrates our strong track record of successfully delivering complex projects safely.
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Meanwhile South32
(ASX:S32) was another major miner to report an indifferent three months to March.
The company on Monday downgraded annual production for several of its operations, citing severe wet weather, especially in Australia and other setbacks such as geotechnical problems at its major coal mine in southern NSW.
The miner reduced guidance at its Cannington zinc, lead and silver mine in Queensland by 6% after heavy rainfall in early March led to a temporary suspension in mining activity.
That’s what happened at the Ernest Henry mine of Evolution Mining and several smaller mines around Cloncurry, as well as the Century mine.
At Cerro Matoso, its Colombia nickel mine, South32 cut fiscal-year guidance by 7%, because of a temporary reduction in access to higher-grade ore.
South32 also cut annual production guidance for its Brazil Alumina, Mozal Aluminium and Illawarra Metallurgical Coal operations, for varying reasons – that’s where the geotech problems restricting longwall production in the quarter occurred.
The miner lifted its estimate for Australia manganese production by 3%, citing improved yields that supported higher primary concentrator output.
Overall, group copper-equivalent production was up 7% fiscal-year to date, South32 said.
“FY23 operating unit cost guidance has been held largely unchanged and group capital expenditure guidance is unchanged, as we remain focused on delivering efficiencies to mitigate cost pressures,” said the company.
CEO Graham Kerr said in Monday’s release that “Several operations faced challenging conditions during the quarter, with production guidance revised down as a result. At Mozal Aluminium, we reduced output as the team continued to work through their recovery plan following the devastating loss of two of our colleagues in November, with efforts hampered by severe flooding in the local area.
“We also temporarily suspended mining activity at Cannington during the quarter to enable the safe return to operations following heavy rainfall.
“Our strong financial position enabled us to return US$31 million to shareholders via our on-market share buy-back in the quarter, with a further US$128 million still to be returned. Separately, we paid a fully-franked interim dividend of US$223 million following the end of the period.
“We remain well positioned to capitalise on improved market conditions, with higher production volumes expected to finish the 2023 financial year and Operating unit cost and capital expenditure guidance held largely unchanged.
“We continue to reshape our portfolio towards commodities critical to a low-carbon future, progressing construction and development studies at Hermosa and adding the prospective Chita Valley copper project to our portfolio of greenfield options.”
