The Fortescue Metals Group Limited (ASX: FMG) share price has significantly outperformed the S&P/ASX 200 Index (ASX: XJO) over the past month. Fortescue shares have gone up by around 30% while the ASX 200 has only risen by 5%.
A significant part of that rise may be because the iron ore price has risen in recent weeks.
The commodity price is a key influencer on profitability because of how much leverage it gets out of changes in the resource price.
Fortescue's costs don't really change if the iron ore price changes, aside from paying more to the government. However, when the iron ore price goes higher, it predominately adds to the net profit after tax (NPAT). This can then boost the dividend as well.
But, despite the recent strong run, one expert thinks that there could be further to run for the iron ore miner.
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Optimistic case for the Fortescue share price
John Athanasiou from Red Leaf Securities suggested on The Bull that the Fortescue share price has been "benefiting from speculation that China will ease COVID-19 restrictions."
In Athanasiou's opinion, an easing of COVID-19 restrictions could lead to the iron ore price being pushed up.
He also referenced the fact that the iron ore miner had a record-breaking first quarter of FY23 when it shipped 47.5 million tonnes of iron ore, which was an increase of 4% on the prior corresponding period.
What else was reported in the second quarter?
Fortescue revealed that it achieved an average revenue per dry metric tonne (dmt) of iron ore of US$87, while C1 costs were US$17.69 per wet metric tonne. There was a price escalation of key input costs, including diesel and labour rates, partly offset by a lower exchange rate.
At 30 September 2022, it had US$3.3 billion of cash and the net debt position was US$2.8 billion.
In terms of how it managed to achieve the strong production, Fortescue said that it reflected "strong operating performance across the supply chain and availability of inventory".
The business also said that it is making progress with a number of its green energy plans. It noted that it has entered into a global strategic collaboration with energy infrastructure developer Tree Energy Solutions which aims to "accelerate the development of a world leading green hydrogen and green energy import facility in Germany."
Fortescue share price snapshot
Over the past six months, the iron ore miner has fallen by around 4%.
