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28-Dec-2021: Their 12-month share price graph suggests to me that the FMG SP has been trying to push through $25 and has failed to do so on a number of occasions in CY2021. Every time it gets there a sell-down has followed, and the biggest of those was down to sub-$15 in Oct/Nov. FMG looks to be heading NE again now, however I don't know how many times it will take for them to break through $25 with conviction. My guess is that we'll know it when we see it because they'll go on to at least $30 in a relatively short space of time when it happens.

I'm not a huge iron ore bull, not by any stretch, however I very much like the new direction that Twiggy is taking this company, particularly the Clean & Green Hydrogen, and his carbon neutral target - by 2030 - see here: Climate Change and Energy | Fortescue Metals Group Ltd (fmgl.com.au)

I think that Andrew ("Twiggy") Forrest has the billions and the willpower and passion to make this happen. He has always set the bar high, with difficult targets to achieve, but he's achieved them all so far, and I'm backing him to continue to do so. He's a man who wants to leave a positive legacy behind and be remembered as somebody who did the right thing and did what he could to improve the world for future generations. It's a powerful combination, having lots of money and lots of passion, and the willpower and determination to achieve things that matter. He also has a wife that is 100% behind him, or rather alongside him - they both want to create a lasting positive legacy and they're doing a pretty damn good job so far.

I understand of course that people doing good things partly or mostly via their control of a public company isn't always going to also provide the best investment option for ordinary retail investors. However, in this case, the vast majority of Twiggy's own wealth is via ownership of FMG shares (he owns nearly 37% [36.74%] of FMG through his family company, Minderoo, and FMG is a now a $59 billion company, so Twiggy's FMG shares are worth over $21 billion) and I therefore conclude that it's in his own best interests for him to keep the FMG share price as buoyant as he can.

A decent FMG share price underpins Twiggy's ability to do all of the stuff that he does outside of FMG with his extensive philanthropy and other business ventures. I doubt that he would do anything to sink the company's share price, certainly not intentionally. I expect him to continue to promote FMG as a positive investment at every opportunity, as he always has, and to always seek to add value at FMG rather than lead them down a path that ultimately results in lower profitability and lower total shareholder returns.

Those reasons also underpin my belief that FMG is likely to continue to provide a very good source of fully franked dividend income, as they have over the past year. This is also needed by Twiggy for his philanthropy and other business ventures, because he funds them primarily from his FMG dividend-derived income.

Regarding iron ore specifically, because let's not kid ourselves, iron ore prices will continue to have a huge impact on investor sentiment and therefore the share prices of iron ore producing companies: I am happy that FMG now have got their C1 cost/wmt (wet metric tonne of iron ore) all the way down to around US$15 to $15.50.

That's their latest guidance, given at their AGM in November, and it's also interesting to note that they have now provided FFI (Fortescue Future Industries) expenditure guidance as well. There have been some commentators suggesting that FFI (which includes the foray into Green Hydrogen power) was going to drain all of the iron ore profits out of FMG leaving shareholders with very little in the way of income or capital growth. Clearly with a targeted FY22 capital expenditure (capex) of US$400 to $600 MILLION for FFI, compared to their iron-ore-related FY22 capex target of US$2.8 to $3.2 BILLION, that is not going to be the case. They are not throwing the farm at this. They are moving into clean and green in a sensible and measured way. In other words, it is going to happen, but it won't happen overnight.

Most people here would be familiar with the flywheel analogy, and here's how FMG see it applying to them:

Additionally, they use a similar method to explain their plans for FFI:

I do not usually take much notice of broker consensus calls and expectations, or their price targets, but I often get interested when most brokers are neutral or negative on a company whose share price is rising, particularly when I personally believe the company has some strong tailwinds, great industry position, and excellent management. Here are the most recent broker calls on FMG according to FNArena.com:

As you can see, we have 4 hold/neutral calls, 2 sell/underweight calls, and only one buy/outperform, which is from Macquarie. That is of course just the 7 brokers that FNArena.com covers. Here's the broker/analyst sentiment according to Commsec:

So Commsec (or their data provider at least) believe there are only 3 positive views on FMG from the 17 brokers that that cover FMG (that are covered by Commsec's data provider).

Not exactly a market darling. Yet the share price has been rising since early November. My personal view is that the brokers and analysts are seeing better shorter-term opportunities elsewhere, and are not really looking at FMG as a 5-year-plus investment. Over 5 to 10 years I think I'll do very well in FMG, in terms of total shareholder returns (capital growth plus dividends), so I bought FMG in two of my real life portfolios during the first half of December at prices ranging from $17.22 to $19 per share. I was buying them at $17.22 on December 3rd, bought more at $18.01 on the 10th, and bought more on the 20th at $19/share. Averaging up for a change, instead of averaging down.

I think broker views and broker calls will likely continue to mostly be behind the curve with FMG, and they will try to play catch up, but may rarely get ahead of what the share price is doing. It seems to me that most people who hold FMG are not doing it based on broker calls, but are instead doing it because they personally believe in the man, his vision, and the company that he has built, and its future prospects.

Not all, but most. And I could be wrong, but that's the impression I get.

OK, from a fundamental POV, have a look at their key metrics, particularly profitability:

Sources: Above: FNArena.com, Below: Commsec (https://www2.commsec.com.au/)

They are HIGHLY profitable!

While there is always commodity-exposure-risk with any miner, especially a miner that only mines a single commodity at this stage, this company has zero net debt. Gearing (ND/E) = negative, i.e. No net debt. Cash on hand of US$6.9 billion and net cash of US$2.7 billion at 30 June 2021. $2.7 billion is a handy net cash buffer to have, especially when your costs are so low, and your margins are so high. To put that into some perspective, FMG could easily survive a prolonged period of unprofitability if that was to occur (something that would drive most smaller companies to the wall), however for FMG to NOT be profitable, the iron ore price would have to half, and then halve again, and then halve again, and then drop a bit further (i.e. reduce by over 90%) and even then they would likely be at around breakeven if not barely profitable.

As long as iron ore prices stay above US$20/tonne I think we're good.

Here's how FMG currently view iron ore demand:

Obviously, Vale's issued (in Brazil) have a fair bit to do with the supply constraints they mention there, and I've been expecting Vale to get on top of those issues for a while now (like, over a year) and they really haven't. But they will, sooner or later. However, I'm not getting too caught up in the big (macro) picture here, I'm looking at FMG as an investment regardless of the commodity that they are involved in. And I'm not trying to predict the supply/demand outlook too much. They are VERY profitable, are spitting off a LOT of cash, much of which is being returned to shareholders, they have a VERY solid balance sheet, and exciting plans for the future.

They will remain highly profitable at MUCH lower iron ore prices. That's the main point that sets them apart from a lot of other miners.

Check out their latest (November AGM) presso here: fortescue-agm-presentation-2021.pdf (fmgl.com.au)

And their plans for establishing a Green Energy manufacturing hub at/near Gladstone in Queensland here: 2279422.pdf (fmgl.com.au)

And their CEO transition announcement here: fortescue---transition-and-leadership-change.pdf (fmgl.com.au)

That is regarding their CEO position, which is not a thesis breaker IMHO, because Andrew Forrest will continue to be the main driving force behind the company and he is remaining in his Chairman role. He is listed as being a Non-Executive Chairman, but make no mistake, as the man who founded the company, built it up to what it is today, and still owns almost 37% of it, he isn't just along for the ride, he is steering this ship.

Twiggy is now Dr Andrew Forrest, due to his PhD in marine science – see here: The doctor is in: 'Twiggy' Forrest gets PhD in marine science (smh.com.au)

He has been passionate about cleaning up the world’s oceans and protecting marine life since he was a child (see story linked to above).

Further Reading: Australia's Fortescue sets sights on becoming world's first supplier of green iron ore | Reuters

Fortescue Future Industries (ffi.com.au)

Presentations and Webcasts | Fortescue Metals Group Ltd (fmgl.com.au)

FMG’s Solomon Hub in Western Australia

FMG’s Iron Bridge Magnetite project in Western Australia

One of FMG’s trains hauling iron ore to Port Hedland for shipping to China

One of FMG’s iron ore haulage vessels (ships)

“Back at the Ranch”: When Dr Andrew (“Twiggy”) Forrest AO made his mining fortune, he bought back his family’s farm. He has since become one of the largest landholders in Western Australia.

Disclosure: I hold FMG shares in real life.

26-March-2023: Update: Another one marked as stale...

The investment thesis in a nutshell is that Twiggy has turned FMG into one of the world's lowest cost producers (3rd lowest cost in the world I believe, behind only BHP & Rio, and ahead of Vale, although I haven't checked on that recently), and at current iron ore prices, FMG are VERY profitable. The Iron Ore price would have to fall a very long way to put FMG's profitability under serious threat.

The fact that the company is churning out good profits and returning a good chunk of that cash to shareholders in the form of dividends is enough on it's own to form a decent investment case for FMG, but the thing that interests me most about the company is FFI - Fortescue Future Industries, and the push to develop green hydrogen and other alternative green energy sources and to turn FMG into the world's first carbon neutral iron ore miner. FFI will burn cash for years until they achieve some commercial success with these new technologies, and that's the risk, however the upside potential of being at the forefront of this should not be overlooked. To date, Twiggy shows no signs of wanting to burn up all of FMG's iron ore profits by going too hard into green hydrogen and the rest of it. He's being quite measured in the way he is going about it, in my view, as underlined by these generous dividends we keep receiving, despite the FFI expenditure.

So, $30/share as a price target (PT, a.k.a. TP: Target Price) might seem a little high, but if you look at how FMG has trended in prior years, it wouldn't take much for them to get there. Just better sentiment around iron ore, the iron ore price, and FMG in particular. It might not happen this year, or next year, but they're going to $30 and beyond at some point. This is a very well run company, and Twiggy Forrest is no mug, he's a very smart and passionate operator. Never underestimate a billionaire with heaps of passion who's prepared to put his own money where his mouth is.

Disclosure: I hold FMG in two of my main real life portfolios as one of the largest positions - it's currently the second largest position in both portfolios, which includes my SMSF (where NST is the larger position). In the other portfolio, Codan (CDA) is the larger position. FMG is also my third largest position here in my Strawman virtual portfolio. (CDA and NST are the larger positions)... So, yeah, I'm a fan.

Thursday 23-Nov-2023: Update: Marked as stale once again - and no change to my $30 price target once again, and they're closer now than they've been since 2021:

Just above $25/share does seem like a strong resistance level that they can't seem to break through - so far they have not remained above $25 for long - they dropped back below $25 again today after closing above $25 for the previous 6 trading days.

Not a bad 5-year return, eh?! Compared to the XJO in particular which many fundies use as their benchmark index - the S&P/ASX200 Total Return Index - which includes all dividends and distributions reinvested back into the underlying companies; the FMG return there does NOT include dividends, and in recent years there have been some nice dividends(!) which would add significantly to the +578.31% return shown there for FMG for the past 5 years. Note - those returns are not per annum, they are the total return over the 5 year period.

But yeah, I'm guessing they'll punch through that resistance level and go on with it at some point - so happy to keep a $30 PT for now.

There have been some orange flags lately (not red ones), including Twiggy and Nicola announcing that they've separated - and that there will be no change to the way they manage FMG, their private family investment group, Tattarang, or their Minderoo Foundation, and that they have no immediate or current plans to sell any of their FMG shares. There is also the number of KMP at FMG who have left in recent months - their CEO (Fiona Hicks), their CFO (Christine Morris), Fortescue Future Industries Director, Guy Debelle, and Laura Woodall, the long-term right-hand woman to successive chief executives.

There have been rumours that Andrew "Twiggy" Forrest is a difficult man to work for and that he doesn't like to be argued with, especially by his own employees. Speaking to 9News on 30 August, Dr Forrest shed some light on the shock departure of Ms Hick, less than six months into the CEO role and a mere 48 hours after the company’s 20-year anniversary celebration at a Pilbara mine site. Dr Forrest was asked whether Ms Hick left of her own accord or if she was pushed out. “Fiona was given a choice to make and she chose, so I’d say she wasn’t pushed,” Dr Forrest told 9News. At that point the company hadn't yet announced who would be replacing those people.

Source: https://miningmagazine.com.au/fortescue-mass-exodus-continues/

And: https://thewest.com.au/news/wa/fmg-exodus-continues-with-departure-of-executive-assistant-to-ceo-laura-woodall--c-11787626

And: https://www.abc.net.au/news/2023-09-01/guy-debelle-quits-andrew-forrests-fortescue-future-industries/102803068

A few days later, in early September, Andrew O’Dowd, FMG’s GM of Operations Planning handing in his notice. He was the fifth exit of a key senior lieutenant at Fortescue within a week.

Source: https://thewest.com.au/business/mining/fortescue-metals-group-exits-guy-debelle-adds-to-long-list-of-executives-and-managers-to-quit-since-2021-c-11769718

That article lists 17 people who have left FMG, Tattarang, Minderoo or Wyloo (controlled by Tatarang) since 2021, however those entities together employ thousands, including maybe one hundred or more executives, with perhaps 40 or 50 of those being KMP/senior executives, and some of those 17 (mentioned in that "West Australian" newspaper article) were not particularly high up (not senior management/KMP). Also, many of the moves may have been due simply to better job offers or new opportunities/challenges elsewhere.

Still, the terms "revolving door" and "exodus" were being used in relation to FMG quite a bit in August and September - particularly by the media - and it's not a good look. And I would call it an orange flag.

But not red flags. And the market has sold them down on each negative news item - and then bought them right back up again. I've trimmed my FMG positions in recent weeks but they remain large positions in my real life portfolios. FMG has become a smaller position here in my SM virtual PF but only because I've sold most of them to buy some MIN and DVP which I believe are likely to have more near/mid-term upside from current levels. But I remain adequately exposed to FMG in real life. They've been an excellent performer in terms of total shareholder returns (TSRs) - more on that a little later...

And then there's the iron ore price:

Source: https://tradingeconomics.com/commodity/ironore62

On the rise, yes, but not looking like we're going to see a 2023 peak of over US$150/tonne like we did in 2022 or prices over US$200/tonne that we saw in 2021.

It looks like US$130 - around where it is now, is the year high - to date, and if it put on another US$10 or $20, that would be a nice Chrissy Present.

Of course, FMG has some of the lowest costs now of all of the majors, way down at US$17.54/wmt (wet metric tonne) in FY23 (US$15.91/wmt in FY22). Their average realised price received for their iron ore was US$94.74/dmt (dry metric tonne) in FY23 (US$99.80/dmt in FY22).

Their FY24 Production Guidance is for 192 - 197mt, including approximately 7mt from Iron Bridge (100% basis) at a C1 cost for Pilbara hematite of US$18.00 to US$19.00/wmt and a C1 cost for Iron Bridge high grade magnetite concentrate of US$45/wmt (Iron Bridge production will sell for higher prices because it will be up to 67% Fe; their Pilbara hematite has traditionally been below 62%).

Perhaps you can see from those numbers why I say that FMG can not only survive but indeed continue to thrive with substantially lower iron prices than what we have now, and if the iron ore price instead goes up, happy days!

Source: https://fortescue.com/investors/results-and-operational-performance/fy23-full-year-results

And: https://www.syfe.com/au/learn/fortescue-metals-group-the-story-so-far-in-2023/ [27-July-2023]

Brazil's Vale claimed in 2021 to be the World’s most efficient iron ore producer with long-term C1 costs estimated at $15/tonne (although closer to $30/tonne when adding transportation costs to Asia’s main ports according to ratings agency S&P) however it is my understanding that Vale was hit particularly hard by the Covid pandemic in Brazil and their costs have increased.

Just on costs:

• C1 cost represents the ‘direct’ production costs of iron ore and is a commonly quoted figure. However, it does not represent the full cost of production;
• Delivered cost includes the C1 cost, plus shipping, royalties and overhead costs; and
• All-In cash cost is the delivered cost, plus interest and sustaining capital expenditure.

And on Wet vs Dry Ore (wmt vs dmt):

• Production is usually quoted in terms of wet metric tonnes (wmt), and the iron ore price is based on dry metric tonnes (dmt)
• To adjust from wet to dry tonnes, an 8% reduction is applied to the wet tonnes to adjust for moisture content

Source: https://www.fiig.com.au/research-and-education/fiig-research-news-item/2016/11/23/fortescue---explaining-the-various-cost-and-price-metrics

And I should point out that the iron ore price chart above shows the Platts 62% Benchmark price and FMG have been paid anywhere from 70% (in 2021) to 86% of those prices (in 2022). This is because they have been producing iron ore below the 62% grade, however they have spent billions developing and commissioning their Iron Bridge Project, which is designed to deliver magnetite of up to 67% grade, and Iron Bridge achieved first concentrate loaded on ship in July (2023).

The updated life of mine C1 cost attributable to Fortescue for Iron Bridge is estimated at US$45/wet metric tonne, with C1 cost guidance for all of their other iron ore production in FY24 to be between US$18.00 - US$19.00/wmt.

Still low cost, and there's also more to FMG now that just iron ore too.

Fortescue Energy

• Fortescue formalised the structure for Fortescue Energy in late FY23, comprising the following integrated segments:
• Fortescue Future Industries: Green energy project development and production
• Fortescue WAE: Battery and fleet technology development and manufacturing
• Fortescue Hydrogen Systems: Electrolyser and hydrogen production systems development and manufacturing.
• Fortescue Energy has prioritised and progressed its global portfolio of green energy projects, with a target of five Final Investment Decisions by the end of calendar year 2023.
• Ongoing focus on priority projects in Australia, United States, Norway, Brazil and Kenya.
• Advanced offtake discussions underway with Australian, European, American, and Asian customers for green hydrogen and derivatives.
• Completed construction works on the 2GW Gladstone electrolyser manufacturing facility.
• Commenced manual assembly of in-house designed proton exchange membrane (PEM) electrolyser stacks, with automated assembly line due for delivery and installation in FY24.
• Advanced development of technology and Intellectual Property to underpin decarbonisation of Fortescue Metals, including testing of green haul trucks and fast charger.
• Expanded WAE’s battery and electric power train production operations in the United Kingdom to focus on zero emission products for the off-road sector.
• Continued research and development into green iron and green steel including agreements with China Baowu Steel Group and Primetals and Voestalpine.
• Positive momentum in global policy environment, including Inflation Reduction Act in the United States, Green Deal Industrial Plan in Europe, and Hydrogen Headstart program in Australia.

Source: https://fortescue.com/investors/results-and-operational-performance/fy23-full-year-results

Latest News:

21-Nov-2023: 2023 Presentation – Annual General Meeting

21-Nov-2023: Green-Energy-and-Green-Metals-Projects-Approved.PDF

17-Nov-2023: Fortescue-to-Establish-a-Major-US-Manufacturing-Facility.PDF

16-Nov-2023: Launch-of-Fortescue-Capital.PDF

26-Oct-2023: September-2023-Quarterly-Production-Report.PDF

20-Oct-2023: Climate Transition Plan

12-Oct-2023: Pilbara Operations Site Tour Presentation October 2023

Plenty Happening!

And then there's this, from their AGM Presso on 21st November (this week):

Hard to argue with that! Click Here to check out the rest of the slides in their 2023 AGM Presentation - there's some really interesting ones.

Disclosure: Yep, I sure do!

--- --- ---

31-May-2024: Update:

Happy with the price target - they've tagged it a couple of times in the past year and then retraced, but I'm confident they're going back up to $30 again, and eventually beyond that level. This one was marked "stale" so I'm refreshing it and updating it. I haven't changed anything I've written above - that will be good to look back on in future years to see what I got right and what I got wrong - but Fortescue is going OK at this point in time, and all remains on track.

Their latest update was on May 14th at the BofA (Bank of America) Global Metals, Mining and Steel Conference in Miami, Florida:

The following are some of the key slides (but not all of them):

That last one is reassuring in terms of FMG continuing to pay out very decent dividends (50% to 80% of underlying NPAT dividend policy) while continuing to grow the business, including the energy division.

Source: BOFA-Conference-Presentation.PDF

If you're interested in iron ore, here are links to the presentations given by some other large players across the industry at the same conference:

BHP: Bank of America Securities 2024 Global Metals, Mining and Steel Conference (bhp.com) [Note BHP were using the opportunity to talk up their bid to merge with or acquire Anglo American at that time, which they (BHP) have sinced walked away from after some serious pushback from Anglo American and a few of their (BHP's) own larger institutional shareholders]

RIO: Bank of America Global Metals, Mining & Steel Conference 2024 (riotinto.com)

There were a few other miners presenting as well, including a few that are not involved in iron ore or steel:

Ivanhoe Mines: BofA Securities 2024 Global Metals, Mining and Steel Conference – Ivanhoe Mines

IGO: BoA-Global-Metals-Mining-and-Steel-Conference-Presentation.pdf (igo.com.au)

Alcoa: Alcoa Corporation - Bank of America Global Metals, Mining & Steel Conference

Anyway, still holding FMG, and still happy with the company and its management.

28-Aug-2024: Nah, not so much now. Update:

No longer holding FMG - sold the last of them in June. I'm wary of iron ore exposure right now - I think that all iron ore miners can go lower if the iron ore price goes lower, and there's every chance that it can. FMG is one of the world's lowest cost iron ore producers - from their main Pilbara operations, not so much from Iron Bridge - so they're not going broke, just lower - most likely.

I have plenty of respect for Andrew ("Twiggy") Forrest and what he has achieved with FMG, an Australian top 20 company, and one that has been paying some of the best dividends as well as providing capital growth up until a few months ago when the iron ore price started falling and he backed away from that "Green Hydrogen or nothing!" mantra of his. There's plenty to be concerned about with FMG at this point actually, and most of it has been discussed here already, so I won't go over it again. I'm sure I'll be back in at some point - FMG is my preferred exposure to iron ore, it's just that I don't want ANY direct exposure to iron ore right now.

They reported today and the market wasn't overly impressed (FMG -1%) but the market was down today so not too bad in that context, however they cut their final div to 89 cents (from $1 last year, and the $1.08 interim div this year) and I expected that - lower profits on lower prices, with a bleak near-term outlook, what do you expect? That is one of the reasons I jumped off the FMG train a couple of months ago.

The iron ore miners are attempting to put a positive spin on the situation (the declining global demand for iron ore at this point, mainly driven by China significantly reducing steel production) but the numbers don't lie. As I said, FMG have very low costs, so they're NOT going to become unprofitable, they'll be one of the last iron ore producers standing if iron ore really goes down the dunny, but they're also unlikely to provide me with my best short term returns from here at this point in time, in my opinion, so I'm out.

For people with an investment time horizon of over 5 years, and especially around 10 years or longer, FMG is probably a good pick-up at below $20/share for a super fund or other set-and-forget type portfolio, but that's not where I'm at right now.

26-Feb-2025: Update: Lowering PT to just above $15 downside resistance level:

I'm not bullish on FMG at all now, and I've explained why in a lengthy straw today, titled "How Low can they go?", which I'll make public in a minute.

Disc: Not Held - sold out last year.

24-July-2025: Update: Raising PT to just below $20 (from $15.20):

I'm not holding FMG and I remain neutral to bearish on iron ore in the medium term, no idea about the short term, and longer term is tricky because of all the new supply that is going to come online progressively over the next decade and whether demand will exceed that extra supply over that period, so I'm personally staying away from iron ore companies at this point.

However, I like a couple of things about the FMG-June-2025-Quarterly-Production-Report.PDF that they released today, and so does the share market with FMG up over +4% (although we still have a few minutes left in the trading day) while BHP is down and RIO is flat.

In a nutshell, FMG are keeping their costs low, which is a good thing for them as their iron ore tends to be of a lower quality (lower percentage of Fe) compared to BHP and RIO, except for FMG's higher grade Iron Bridge Concentrate - of which they produced 2.4Mt in the quarter for a total of 7.1Mt in FY25.  It's worth noting however that Iron Bridge is still struggling to ramp up with today's reports saying:

• Update on the staged ramp up of Iron Bridge, with nameplate capacity of 22Mt per annum anticipated to be achieved in FY28 amidst further process optimisation.

But back to their costs. The vast majority of their production is Hematite ore, and their C1 cost for Hematite was US$16.29/wet metric tonne (wmt) in Q4 FY25 and US$17.99/wmt for the full year (FY25). That was 1% lower than FY24 and is their first annual cost decline since FY20.  That's positive.

To give you an idea of the discounts FMG have to accept for their lower quality Hematite, their Hematite average revenue of US$82/dry metric tonne (dmt) for the quarter, was 84% of the average Platts 62% CFR Index.

FMG's average revenue of US$85/dmt in FY25 represents both that Hematite production and their Iron Bridge Concentrate revenue of US$108/dmt for the quarter (100% of the average Platts 65% CFR Index and 111% of the average Platts 62% CFR Index). 

It's clear why they badly want to get Iron Bridge up to nameplate capacity! Much better prices for that concentrate compared to their Hematite DSO which represents the vast majority of their production.

Here's a snapshot of Page 4 of their quarterly today:

The Good:

• Exploration continues in Australia, Gabon, Argentina and Peru;
• They are starting to kill off some of their ambitious Hydrogen projects, and the two that this report names as having been axed are the Arizona Hydrogen Project and the PEM50 Project in Gladstone, Australia. To be clear, I'm all for progressing clean energy and renewables, alternative energy solutions, etc., but Twiggy has been far too much, "My way or the Highway; and I'm building this stuff whether it makes financial sense or not!!", hence his revolving door at FMG's C-suite, however he is clearly starting to accept some economic reality now and agreeing that there are more ways than just green hydrogen to skin that particular cat;
• Their FY26 expenditure guidance of US$300 mill in Capex and $400 mill of Opex for their "Energy" division (which is everything except for iron ore production, i.e. "Energy" is all of their clean & green projects) is much lower than many brokers and analysts had feared. Compare that with their FY26 expenditure guidance of US$3.3 to $4 Billion in capex for their Metals division and you can see that FMG is prioritising their core iron ore business and reducing expenditure on everything else, which is what most analysts want to hear; and
• Their C1 cost guidance (in FY26) of between US$17.50 and $18.50 per wmt (wet metric tonne) of Hematite iron ore is excellent - costs below US$20/tonne are world leading; Where FMG lose ground is with their lower realised prices due to their lower grades (as I've already discussed). But their costs are very low.

The Bad:

• Flagging pre-tax write-downs of circa $150 million relating to their Energy division projects that they've just axed isn't great, but it could certainly be worse. The problem is that it may well get worse over future years;
• While having $4.3 billion (US$) in the bank is a good look, they also have $5.4 billion in gross debt (all in US$) giving them a net debt position of $1.1 billion. The good news about that is that debt has halved over the quarter; they had $2.1 Billion of net debt at 31st March 2025. But they still have debt. Lucky they're making money, eh!?! They could be debt free (in terms of Net Debt) in either 3 or 6 months' time, so that is a good thing, but for now they have over a Bill in net debt;
• FY25 Capex was US$3.9 Billion and their FY26 Capex guidance for their Metals division is for between US$3.3 and US$4.0 Billion, so they are NOT flagging reduced expenditure there; at the top end of guidance (US$4 B) it would exceed FY25 Capex. Out of that, they are planning to spend between US$900 million and US$1.2 Billion on "Decarbonisation", so I suspect that some of that reduced "Energy" division capex has been reallocated to "Metals" because it is expected to directly impact their Iron Ore ("Metals") business. This could be seen as an orange flag by some analysts.

In summary, mostly good, but a tough sector, and they can only control their costs and their expenditure; they have bugger-all control over the prices they receive for their iron ore, and I'm not bullish on iron ore because of increasing supply and future demand being less than clear.

But the market liked it. FMG closed up +4.34% (or +79 cents) @ $19.00 today. BHP down a little, RIO up a tiny bit (+0.33%), so FMG was getting the love in the sector today on the back of their quarterly.

I am still on the sidelines with FMG, with no intentions of buying back in any time soon, however I'll add a couple of dollars to my price target for FMG anyway because of their cost control, debt reduction and renewed focus on their profitable iron ore division (meaning the cancellation of two of their green hydrogen projects).

Not enough clear upside for me to jump back onboard, but they are probably going a little higher from here, just not back to their previous highs any time soon.