AUSTRALIA FIRST TO MARKET

Research evidence excerpt

AUSTRALIA FIRST TO MARKET

Asia Pacific Equity Research

Australia First to Market 04 August 2026

Top Stories

Fortescue (Lyndon Fagan) (FMG AU, OW)

4Q26 results: record FY26 shipments overshadowed by cost inflation and weak Iron Bridge outlook;

retain OW

Key takeaways: 1) Q4 hematite shipments were ahead of JPMe, while unit costs were a touch lower; despite a weaker than

expected achieved price, the company finished the period in a better than expected net debt position of just $0.8bn, 2) Iron

Bridge continues to struggle - a $750m impairment has been recorded, FY27 attributable costs are ~$900m or around $100/t,

no value in use premium is being achieved, and medium-term cost guidance / nameplate capacity looks optimistic - we no

longer have a positive NPV for the asset and expect a FY27 loss of $150m (the asset now lacks relevance), 3) FY27 hematite

C1 guidance of ~$21/t is up ~9% YoY, and although we had this captured in our numbers; it was about $1/t higher than cons;

FY27 capex guidance is also higher than the street at $3.8-4.8bn (but in line with JPMe). The significant cost pressures created

from diesel, explosives, and higher AUD are being felt in what we regard as a very well run business - it provides a read

through into what we could expect from BHP / MIN iron ore cost guidance in August. Our FY27 earnings are down just 1%, but

our NPV falls 7% after wiping out Iron Bridge, and factoring in higher capex for hematite. The stock screens cheap on a P/NPV

of 0.82x, but our 1yr fwd EV/EBITDA is closer to ~6x and there is limited FCF yield. We expect near-term share price pressure

on weak sentiment, but can see the stock trading higher as iron ore bounces out of the cost curve through the balance of the

year. Maintain OW with $23 PT (from $24ps).