Record Iron Ore Production Fails to Impress Fortescue Investors as Miner Ups China Investment
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A highest-ever first half-year figure for iron ore production, which failed to boost investor confidence in Australian mining giant Fortescue saw the company’s shares dig slightly, in contrast to competitor Rio Tinto, which rose for the second consecutive session.
Fortescue recorded higher-than-anticipated production costs, which saw it weaken marginally in the second quarter.
However, extraction costs during the quarter were 5 percent higher than during the same period in 2024, and underperformance at Fortescue’s Iron Bridge project, a magnetite mining operation located 145 kilometres south of Port Hedland in Western Australia, made for a marginally weaker quarter performance, according to RBC Capital Markets, which said the company’s guidance credibility “remains intact.”
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Hematite extraction costs averaged US$18.64 per tonne, slightly above the top end of the company’s full-year guidance of US$17.50 to US$18.50 per tonne.
The situation mirrors one the company faced in 2023, when it announced it had hit a fifth successive iron ore export record in the 12 months to the end of June that year, but flagged further delays to the full ramp-up of Iron Bridge and predicted full production of 22 Mt per year would be achieved by mid-2025.
The company’s original plan, announced in April 2019, was to have the mine exporting at full capacity by 2023, at a cost of about $3.8 billion ($2.6 billion). But the pandemic delayed its completion date, and the cost increased to $5.7 billion.
“It was a record first half, with shipments reaching new highs across our operations,” Fortescue Metals and Operations CEO Dino Otranto said. “This was achieved safely and sets us up well heading into the second half to meet our FY26 shipments and cost guidance.”
The update came days after competitor Rio Tinto also announced the best-ever quarterly iron ore production from its Pilbara operations despite major disruptions from extreme weather.
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Fortescue's large-scale Battery Energy Storage System (BESS) at North Star Junction. The installation is powered by BYD’s advanced Blade Battery technology. Photo courtesy of Fortescue Communications.
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BHP’s update for the period was also generally positive, although it was forced to accept lower iron ore prices from China’s state-backed steelmaker after months of tough negotiations.
With both demand and competition for base metals and critical minerals increasing due to the global energy transition, Fortescue continued to grow its portfolio, including via assets in Latin America and Africa, Chief of Growth and Strategy Gus Pichot said.
“In line with our critical minerals strategy, this quarter we entered into a binding agreement to acquire the remaining 64 percent of Alta Copper’s shares,” he said.
“We’ve also continued to progress studies into the Belinga Iron Ore Project in Gabon, establishing a presidential taskforce to streamline the planning and delivery of an integrated mine, rail and port solution.”
Fortescue also continued to make progress on its green energy ambitions, delivering its first large-scale battery energy storage system at North Star Junction, situated alongside the Iron Bridge project, with a total capacity of 250 Megawatt-hours. That’s the first step in a planned 4 to 5 Gigawatt-hour rollout of energy storage required to support the decarbonisation of its operations in future.
“We are fundamentally changing how we power our operations by combining firmed renewable energy, our high-voltage transmission infrastructure and growing electric fleet, led by Fortescue Zero technologies,” Otranto said.
To help ensure the continuation of its iron ore exports to China, Fortescue has increased its senior leadership in that country and its purchases of battery electric storage, solar panels and wind turbines from Chinese companies, Otranto told a results call, including from electric vehicle maker BYD.
He said it was “critically important” for the company as it enters into “very, very robust, very strong conversations” with China Mineral Resources Group (CMRG), which buys iron ore on behalf of more than half of China’s steel mills.
Fortescue maintained its FY26 guidance for shipments, production costs and capital expenditure, with management expressing confidence that the strong first-half performance provides momentum heading into the second half of the financial year. It will report half-year results on Feb. 25.
However, some analysts say the share price is still overvalued.
