KGI Research Singapore

Singapore's leading broker offering Futures, FX, Equities and Wealth Management.

Company Update: Fortress Minerals Ltd. (FMIL SP/ OAJ.SI)

Company Update: 31 January 2024

Iron ore prices recovering

  • Stable 3Q24. While the company saw a higher average selling price for iron ore concentrates for the quarter, this was offset by a decline in sales volume over the quarter. The company’s profitability is also negatively affected by the presence of high inflationary pressures which kept average unit cost elevated. 3Q24 revenue decreased slightly by 3.4% YoY to US$10.9mn, and GPM fell slightly to 66.1%. NPAT dropped 20.9% YoY to US$2.33mn, and NPM dropped to 21.4% in 3Q24 from 26.1% in 3Q23.
  • Rallying iron ore prices. Iron ore prices have been on a rally  since Sep 2023, rising from around US$110/ton to around US$130/ton. China has been rolling out more supportive policies, including a US$137bn infrastructure spending plan. These policies have led to an increase in demand for iron ore and ensuing high prices. However, with China’s economy still portraying a gloomy outlook, iron ore prices have retracted slightly since the start of 2024.
  • New agreements with local steel mills. The company recently announced two new 9-month offtake agreements with an independent third-party domestic steel mill in Malaysia. These agreements are expected to contribute positively to the company’s FY24 results.
  • Going forward, interest rate cuts are likely to happen in the first half of 2024. We continue to anticipate a reduction in cost as inflationary pressures ease. Higher operational efficiency of the company’s CASB mine is also expected to lower unit costs in the longer term. The company should see a decline in costs and expenses going into the calendar year of 2024. We continue to expect the company business to remain stable in 2H23. We maintain an OUTPERFORM recommendation with an unchanged target price (TP) of S$0.35.

3Q24 results update.

The company reported a revenue of US$10.9mn in 3Q24, down 3.4% YoY. While the average realised selling price increased to US$93.45/DMT, sales volume for the quarter saw a dip by 11.7%. Due to inflationary pressures, the company saw a higher average unit cost in 3Q24. 3Q24 GPM fell but remained relatively stable at 65.9%. EBITDA fell by 9.4% YoY to US$4.73mn for 3Q24. NPAT dropped by 20.9% YoY to US$2.33mn, and NPM dropped to 21.4% in 3Q24 from 26.1% in 3Q23.

Valuation & Action

We maintain an OUTPERFORM recommendation with an unchanged TP of S$0.35, based on a blended valuation, using discounted cash flow (DCF) with a terminal growth rate of 2% and a WACC of 10%, as well as a comparable multiples valuation, using an industry EV/Resource multiple of 3.6x.


Iron ore prices are the key driver of the company’s profitability. Despite a recent rally in Iron ore prices, prices shall resume a downtrend if China’s manufacturing and construction activities remain in a downturn amidst ineffective monetary and fiscal policy support. A potential global recession is another headwind for iron ore prices.

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