Why has the Grange Resources share price plunged 30% so far this week?

The half-year report from Grange Resources has disappointed investors.

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Key points

  • The Grange Resources share price has tumbled 31% since the market close on Friday
  • The iron ore pellet miner released its half-year report yesterday 
  • The report revealed similar production to 1H FY21 but reduced revenue and profit in 1H FY22

The Grange Resources Limited (ASX: GRR) share price is having an absolute shocker, tumbling 31% since the market close on Friday.

This spectacular drop follows the release of the iron ore pellet miner's FY22 half-year earnings yesterday.

As my Fool colleague James reported, Grange Resources shares dropped 28% to close at 98 cents yesterday. The Grange Resources share price is falling further today, down 9.74% to 88 cents currently.

Why is the Grange Resources share price falling off a cliff?

Grange Resources revealed a sharp drop in earnings over the six months ending 30 June 2022.

Here are the key metrics of the report:

  • Revenue from ordinary activities of $341 million, down 24% on the prior corresponding period (pcp)
  • Statutory profit after tax of $132.2 million, down 36% pcp
  • Pellet production of 1.27 million tonnes, steady on pcp
  • Pellet sales of 1.18 million tonnes, down 2.5% pcp
  • Average pellet price of US$174.96 per tonne, down from US$260.54 per tonne pcp
  • Unit cash operating costs of $113.66 per tonne, up from $100.23 per tonne pcp
  • Cash, cash equivalents, and liquid investments of $369.5 million (as at 30 June) compared to $443.9 million (as at 31 December 2021)
  • Net assets of $887.7 million (as at 30 June), up from $871.2 million (as at 31 December 2021)
  • Final dividend of 2 cents per share with 100% franking declared, payable on 30 September.

What else happened in 1H FY22?

The question Grange Resources shareholders might be asking is how the company mined the same amount of product as 1H FY21 but achieved less revenue and profit in 1H FY22.

The miner said higher energy costs were to blame for the rise in its operating expenses. It also cited volatility in iron ore prices.

Grange Resources said an escalation of COVID-19 locally had "some impact" on activity due to increased staff absenteeism because of isolation requirements.

What did management say?

In its statement, the company said:

Despite continued volatility and uncertainty as to the future direction of iron ore prices, the market continues to recognise the quality value in use premium for high quality, low impurity iron ore products sold by Grange.

What's next?

Grange will continue to deliver into secured term offtake agreements for all products in 2022.

Grange Resources share price snapshot

The miner's shares are up 10% in the year to date. This compares with a 9% dip in the S&P/ASX All Ordinaries Index (ASX: XAO).

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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