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Fortescue achieves record iron ore shipments

The Fortescue Metals Group Limited (ASX: FMG) share price could be on the move on Thursday following the release of its fourth quarter update.

How did Fortescue perform in the fourth quarter and FY 2019?

Fortescue had another record quarter during the three months to June 30, culminating in quarterly shipments of 46.6 million tonnes (mt).

This brought its FY 2019 shipments to 167.7mt. Whilst this was a 1% decline on the prior year, it is worth noting that this was due to the impact of Cyclone Veronica in the second half.

The average price Fortescue received increased during the quarter by a solid 30% to US$92 per dry metric tonne (dmt) compared to the March quarter of US$71 per dmt.

FY 2019 average realised revenue, after taking into account mark to market adjustments, was US$65 per dmt. This was an increase of 50% compared to FY 2018’s US$44 per dmt.

And thanks to its disciplined cost management, mining and processing performance, the company reported a 5% quarter on quarter decline in cash production costs to US$12.78 per wet metric tonne (wmt) during the fourth quarter.

This brought its full year cash production costs to US$13.11 per wmt, up 6% on FY 2018’s numbers.

Fortescue’s chief executive officer, Elizabeth Gaines, was rightfully pleased with the strong final quarter.

She said “The Fortescue team has achieved exceptional results across safety, production, costs and delivery of our product strategy in the June quarter. [..] We have delivered record quarterly shipments of 46.6mt while reducing C1 costs by over five per cent to US$12.78/wmt reinforcing our position as the lowest cost producer. In addition, with healthy iron ore inventory levels across the supply chain we are well positioned to continue delivery of our highly valued product mix to customers in FY20.”

Gaines also provided an update on the company’s growth and development projects.

She advised that: “Fortescue’s growth and development projects at Eliwana and Iron Bridge remain on schedule and budget. In addition, our ongoing investment in autonomy, relocatable conveyors and other initiatives such as the Queens Valley development will continue to deliver enhanced returns to shareholders.”

Looking ahead, the company expects FY 2020 shipments in the range of 170-175mt inclusive of 17-20mt of West Pilbara Fines product. Cash production costs are expected to be in the range of US$13.25-13.75 per wmt.

How does this compare to expectations?

This strong finish to the year appears to have outperformed the market’s expectations.

According to a note out of Goldman Sachs, its analysts were expecting “a 19% increase in shipments QoQ to 45.5Mt. Despite the 1.5-2Mt of shipments impacted by cyclone Veronica, we expect FY19 shipments of 166.5Mt in line with guidance of 165-170Mt and costs of US$13.4/wmt, the upper end of guidance (US$13-13.5/wmt).”

In light of this, I wouldn’t be surprised to see the Fortescue share price continue its ascent today.

Elsewhere, investors may want to keep an eye on the shares of gold miner Newcrest Mining Limited (ASX: NCM) and lithium miner Pilbara Minerals Ltd (ASX: PLS) following the release of their quarterly updates this morning.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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