Fortescue (ASX:FMG) Metals Group Ltd (ASX: FMG) experienced a notable 12% drop in its share price in July, a stark contrast to the 4.2% increase in the S&P/ASX 200 Index (ASX: XJO). This significant underperformance reflects ongoing difficulties for the ASX-listed iron ore producer, adding to a year marked by substantial volatility.
Recent Performance and Market Conditions The decline in Fortescue's share price, an ASX mining stock, follows a troubling trend. Over the course of 2024, the company's stock has fallen by 37%, marking one of the most severe percentage declines in its history. Contributing to this downturn is the drop in iron ore prices, which have decreased from over US$140 per tonne at the beginning of the year to approximately US$100 per tonne currently.
Quarterly Report Highlights In its latest quarterly update, Fortescue reported a 10% increase in iron ore shipments for the fourth quarter, totaling 53.7 million tonnes (mt). For the 2024 financial year, the total ore shipped amounted to 191.6mt, a slight decrease from the previous year's total of 192mt.
Looking ahead to FY25, Fortescue aims to achieve shipments ranging from 190mt to 200mt. The company’s production levels will be crucial in determining the future performance of its shares.
The average revenue per dry metric tonne (dmt) for the fourth quarter was reported at US$92.12. For the entire FY24, the average revenue was US$103.01 per dmt. Additionally, Fortescue ended June with a strong cash balance of US$4.9 billion and a net debt of US$0.5 billion.
Strategic Developments Fortescue is advancing its Pecem green hydrogen project in Brazil, which has now reached the feasibility phase. This includes the commencement of the front-end engineering design process. Furthermore, a consortium involving Fortescue and Actis has secured the rights to develop green hydrogen projects in Oman. The company has also signed contracts for the sale of the first electrolysers from its facility in Gladstone, Queensland.
Operational Changes In July, Fortescue announced a significant management and organizational update aimed at streamlining operations, eliminating redundancy, and achieving cost synergies. As part of this restructuring, approximately 700 employees across global operations are expected to be offered redundancies, with the process set to conclude by the end of July 2024. The company also appointed new executives, including a chief financial officer, chief operating officer, and company secretary.
Recent Share Sale Towards the end of the month, a major shareholder reportedly sold a substantial amount of Fortescue shares, totaling $1.9 billion. This sale, attributed to The Capital Group, followed a strategic shift away from green hydrogen initiatives. The reduction in focus on green energy may prompt other investors with a hydrogen-focused outlook to reconsider their positions in Fortescue.
Fortescue Metals Group Ltd is navigating a challenging period marked by a significant drop in share price, declining iron ore prices, and strategic operational changes. The company's focus on green energy projects and recent management updates will be critical factors to watch in the coming months.