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500% Profit Surge – How Fortress Minerals Is Defying Global Steel Headwinds In Q3 FY2026 · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome back to another Deep Dive, and we are unpacking the latest financial
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  results from Fortress Minerals Limited.
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  Specifically, we're looking at their third quarter for the financial year 2026,
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  which wrapped up back in November 2025.
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  And just to set the stage for everyone listening, Fortress Minerals is listed
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  on the SGX, that's the Singapore exchange under the ticker OAJ.
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  They are principally engaged in the exploration, mining and production of iron
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  ore, primarily based in Malaysia. And our goal today is simple.
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  We're looking at this earnings report through the eyes of an investor.
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  Whether you hold a stock or are just watching the sector, you have to ask,
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  is this 500% jump a flash in the pan? Yeah, a one-off.
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  Is it just a lucky quarter where everything went right?
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  Or is this a sign of a genuinely robust business model hitting its stride,
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  539%. It's a number that absolutely demands a double take, doesn't it? It sounds fake.
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  I mean, honestly, when we talk about mining companies, especially,
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  you know, digging up iron ore, I'm expecting steady, maybe slightly boring returns.
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  Rocks in, money out. Exactly. Slow and steady. But a net profit increase of over 500% year on year,
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  that sounds less like a mining operation and more like a tech startup that just
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  figured out how to monetize AI. It definitely stands out on the spreadsheet.
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  It's the kind of number that makes you wonder if there's a typo or if they found gold instead of iron.
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  Right. But as we always say, a percentage sign that massive is usually hiding
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  a very specific and often nuanced story.
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  Yeah. And to answer it, we have to look past the headlines. We need to talk
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  about the financial highlights.
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  Sure. But we also need to get into the operational weeds. The how.
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  The how behind the numbers.
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  And importantly, we need to look at where they're spending their cash,
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  because as we'll see, it's not necessarily going where you might expect.
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  Okay, so let's start at the top.
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  Money coming in the door. Revenue. All right. So revenue for the third quarter
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  of FY2026 came in at U.S. $18.4 million.
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  Now that's up 41.1% compared to the same period last year.
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  Okay. 41% revenue growth is solid. It's not 500%, but it's very healthy.
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  Now my first instinct, and I think the instinct of most people,
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  is to assume the price of the commodity just skyrocketed. That's the usual suspect.
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  Did iron ore prices go to the moon in late 2025? You would think so, right?
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  Usually if a miner makes more money, it's because the market price for their
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  metal went up. But here's where it gets really interesting. The answer is no. No.
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  In fact, the average realized selling price for their iron ore actually dropped. It went down?
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  Slightly, but yes. It dropped by 1.9% to US$92.09 per dry metric ton.
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  The benchmark indices were actually weaker this quarter compared to last year.
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  So let me get this straight. They made way more money, 41% more retinue,
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  while selling their product for less money per ton than they did a year ago.
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  Correct. That only leaves one variable to explain the difference.
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  Volume. This is entirely a volume-driven result. Oh. Their sales volume surged by 43.8%.
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  Wow. They sold nearly 200,000 dry metric tons in just this quarter alone.
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  Okay, let's unpack this with an analogy because I think it's crucial.
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  It's like owning a widget factory. If you're selling widgets for $100 and suddenly
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  the market price drops to $98, you might panic. You'd think, oh no, my margins.
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  Exactly, my margins are getting squeezed. Unless...
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  You suddenly have the capacity to sell almost 50% more widgets than you did yesterday.
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  Precisely. If you can flood the market with volume, you can absorb a tiny price
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  dip and still make absolute bank on the total revenue.
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  And that's exactly what Fortress did. They simply dug up, processed,
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  and sold way more iron ore.
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  Which brings us back to that staggering bottom line, the profit.
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  We threw out that 539% number at the start.
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  Break that down for us, because revenue up 40% usually doesn't translate to
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  profit up 500%. No, not without something traumatic happening in the middle
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  of the income statement. So what happened?
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  So the line item is profit attributable to owners of the company.
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  That jumped from roughly U.S.
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  $700,000 in the same quarter last year.
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  To U.S. $4.45 million this quarter.
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  From 700 grand to 4.5 million. I mean, that is just huge leverage.
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  It's a 539% increase. And if you look at their gross profit margin,
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  it's arguably even more impressive as an efficiency metric.
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  It jumped from roughly 55.8% to 65.7%. A 65% gross margin in mining.
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  That feels incredibly high. It is.
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  Usually, mining is a messy, expensive business. More volume means more costs,
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  doesn't it? You have to pay for more fuel, more trucks, more workers.
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  How did they increase their margins while the selling price went down?
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  This is the part of the report that I found most fascinating,
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  and it brings us to a really important concept for investors in this sector, economies of scale.
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  The idea that the more you make, the cheaper it gets to make each one. Exactly.
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  But to understand it here, we need to clarify some terminology first.
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  Let's see two terms in the report, DMT and WMT.
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  Ah, yes. Yeah. Acronyms. Lay them out.
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  OK, so DMT stands for dry metric ton. That's what they sell.
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  When you sell iron ore, the buyer pays for the iron content, not the water weight.
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  So you strip out the moisture for the price. That's the $92.09 figure we mentioned.
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  Right. That's the revenue side. But on the cost side, the mining side,
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  you're digging up earth that is full of moisture.
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  You have to lift that water weight, truck that water weight.
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  You pay to move the wet dirt, but you only get paid for the dry rock.
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  You got it. So costs are often calculated per wet metric tonne.
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  Or WMT. Now here's the magic. Their average unit cost of sales dropped significantly.
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  It fell by 24.4% down to U.S. $28.41 per wet metric ton.
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  Wait, wait, let me just pause there. They are selling for roughly $92 and it
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  costs them roughly $28 to get it out of the ground.
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  Roughly speaking, yes. That is a massive spread. That's over a $60 margin per
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  ton. That's a license to print money.
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  But how, I mean, how did they cut costs by a quarter? Did they slash wages,
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  find easier dirt? What happened? It goes back to that volume story.
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  In mining, you have a huge amount of fixed costs. You have to maintain the site,
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  pay for security, run the administrative office, light the camp.
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  Right. The security guard gets paid the same whether the trucks are full or empty.
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  Exactly. So when your production volumes shoot up by 43%, those fixed costs
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  get spread thinner across more tons.
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  Each ton carries a smaller and smaller sort of backpack of overhead costs.
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  But did anything physically change on the ground, or did they just decide to
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  work harder this quarter? No, they actually invested in infrastructure.
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  The report highlights the new crushing plant at their Buket Bissimine.
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  It was completed in the first quarter of FY2026 and is now fully operational.
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  Ah, okay. That plant is what's driving these efficiencies.
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  So that capital expenditure, the money they spent earlier in the year, is paying off now.
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  It's paying off in spades. It lets them process more or faster,
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  more reliably. They removed a bottleneck.
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  And they also mentioned ongoing development for an integrated processing facility
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  expected in FY 2027. So they aren't stopping there.
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  No, they're building on it. It sounds like a well-oiled machine.
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  But a machine needs fuel or, in this case, cash. Let's do a health check. Balance sheet time.
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  Do they have the cash to keep this momentum going?
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  They are in a very strong position. As of November 30th, their cash and bank
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  balances sit at U.S. $10.2 million.
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  Okay. That's up from about $7.8 million back in February 2025.
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  That's a healthy buffer. And their working capital is positive at U.S. $15.6 million.
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  Yeah. That essentially means they have plenty of liquid assets to cover their
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  short-term liabilities.
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  They aren't scrambling to pay the bills. Okay. So let's role play for a second.
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  I'm putting on my investor hat.
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  Specifically my, I want to return on my investment hat. Right.
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  I'm at the shareholder meeting. I see 500% profit growth. I see a pile of cash in the bank.
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  I raise my hand and say, excuse me, surely you are declaring a fat dividend
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  this quarter. And the answer from the board would be,
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  Silence. No dividend declared for this quarter. Oh, come on.
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  I'm the disappointed investor now. Why? They made four and a half million dollars.
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  Why aren't they sharing it?
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  It does sting a little if you're strictly an income investor,
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  but you have to look at the rationale.
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  The report states clearly that they are conserving cash. For what?
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  For working capital and future growth.
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  Future growth. That's the classic corporate excuse to keep the money.
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  What does it actually mean here? Well, specifically, the development of the
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  CASB mine and exploration in Saba, they are in what we might call build mode, not reward mode.
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  So they are taking those profits and pouring them right back into the ground.
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  Literally and figuratively.
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  If we look at the cash flow statement, it tells the whole story.
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  They generated U.S. $9.5 million from operations.
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  That's the cash coming in from selling war. Which is fantastic.
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  Fantastic cash generation.
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  But then look at the investing cash flow. They spent U.S. $7.1 million.
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  Okay, where did that $7 million go? It's a mix of things.
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  Exploration and Evaluation Assets, that's looking for more ore,
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  went up to U.S. $7.8 million in total assets.
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  They spent money on mining properties, plant equipment, you know,
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  constructing those processing plants we mentioned.
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  So they aren't hoarding the cash, they're using it, converting cash into assets. Exactly.
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  And they also made some acquisitions. They acquired subsidiaries and made an
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  investment in an associate company called Sivanjar Baina SDNN, BHD.
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  That's a good segue into the strategic moves. I noticed some new names in the
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  corporate structure section.
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  It seems like they aren't just digging holes anymore. No, they're definitely
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  broadening their scope.
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  One of the interesting updates is the incorporation of a new subsidiary.
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  Fortress Machineries. Sounds heavy. What do they do? The principal activity
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  is listed as leasing industrial machinery and mining equipment.
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  So instead of just buying equipment to use, they might be leasing it out to others.
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  It creates a whole new revenue stream. If you have the capital to buy heavy
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  machinery, leasing it out can be a pretty steady business.
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  It diversifies them slightly away from pure commodity price risk. That's smart.
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  Even if iron ore prices dip, people still need to rent bulldozers. Exactly.
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  And speaking of diversification, I saw a mention of something called Norwest
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  Minerals. That doesn't sound like a Malaysian name. It's not.
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  Norris Minerals LTD is listed on the ASX, the Australian Securities Exchange.
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  Fortress holds an equity instrument in them. This signals, you know,
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  a desire to look beyond their own backyard.
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  Ah, so they're exploring other strategic and critical minerals dipping a toe
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  into the Australian market.
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  That shows ambition. It does. And if you look at their total asset growth, it reflects that.
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  Total assets grew to U.S. $120.3 million.
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  And a big chunk of that increase is in mining properties, which is now valued at U.S. $45.7 million.
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  Why the jump in property value? Land prices? It's about rights.
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  Part of it is them securing concessionaire rights for the CASB mine for 21 years.
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  21 years. That's a long runway.
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  It gives investors certainty. They have the legal right to mine there for two decades.
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  Okay, so the internal picture is pretty rosy. High profits, low costs,
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  expanding assets, long-term rights.
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  But Fortress doesn't exist in a vacuum. They sell iron ore, which is used to
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  make steel. What's the weather report for the global market?
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  This is where we need to be realistic.
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  The macro context isn't exactly a boom time scenario.
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  According to the report, global crude steel production is actually down 2.0%.
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  That's not great. The pie is shrinking.
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  And the biggest slice of that pie, China, is shrinking faster.
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  China's production is down 4.0%. And China is usually the voracious appetite
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  that eats up all the iron ore.
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  What's the slowdown there? It's the property sector headwinds we've been hearing about for a while.
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  Less construction means less steel needed. Plus, the Chinese government is putting
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  caps on output to manage emissions and overcapacity.
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  So if China sneezes, does Fortress catch a cold? That's always the worry with these regional miners.
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  That's the classic risk. But here's the counter-narrative the company is banking
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  on. While China is down, India's production is up 10.3%. Oh, interesting.
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  And the ASEAN markets are growing too. And Fortress is in Malaysia,
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  right in the ASEAN neighborhood. Exactly.
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  They sell regionally, both within Malaysia and for export.
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  So they aren't solely dependent on China. They're betting that regional demand
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  plus cheaper logistics will shield them.
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  That's a crucial distinction. It's not just a global price. It's about who's
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  buying what you can ship cheaply.
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  Right. But there's still financial risks closer to home. We talked about the
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  unit costs coming down, but not all costs are down. What's going up?
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  Well, for one, the taxman is taking a bigger bite.
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  Their effective tax rate was 26.4%, which is higher than the statutory 24%.
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  Why are they paying extra tax? That seems inefficient.
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  It's a quirk of corporate structure. Some subsidiaries made losses, others made profits.
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  And you can't always use the losses from one to offset the taxes on the other immediately.
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  The joys of corporate accounting. The losses are trapped in a silo.
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  Exactly. And, you know, other expenses increased naturally with volume.
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  Royalty expenses went up. Transportation costs went up. You have to move all that extra ore.
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  Administrative staff costs rose, too. Growing pains. To an extent.
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  But as long as that core unit cost of sales stays low at $28,
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  they can absorb these creeping admin costs.
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  So looking forward, what's on the horizon? We mentioned the processing facility.
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  That is the big operational milestone.
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  The integrated processing facility expected in FY 2027.
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  If the new crushing plant drove costs down this much, that facility could unlock even more value.
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  So FY 2027 is the next big leap. That's the plan. They're also looking at trial
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  production with a pilot plant for the CASB mine.
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  All right, let's try to bring this all together. If you had to summarize this
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  quarter for fortress minerals in one sentence, what would it be? I would say.
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  It's a story of operational discipline triumphing over tricky market conditions.
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  I like that. They didn't get lucky with high prices. They just got really,
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  really efficient at digging.
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  Exactly. They delivered a blockbuster quarter profit up over 500% purely because
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  they drove their unit costs down to U.S. $28.41.
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  That is a fortress, pun intended, against price volatility. And for the investor
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  listening to this, what's the takeaway?
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  The takeaway is that the financials look fantastic, but you need to understand the company's face.
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  Lack of a dividend isn't a snub, it's a signal. They're in aggressive build mode.
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  They're reinvesting everything into CASB, into machinery, into exploration.
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  They're trying to set themselves up for the next decade, not just the next quarter.
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  So if you want immediate passive income, maybe look elsewhere.
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  But if you want to ride along with a company that is expanding its footprint
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  and efficiency, this is an interesting play.
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  Precisely. But I'll leave you with a provocative thought to chew on.
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  Let's hear it. We've established that their low unit cost is their shield.
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  But we also know global steel demand is flattening and China is slowing down.
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  Fortress is betting big that their efficiency and regional demand can protect
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  them. But here's the question.
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  Can they maintain these 65% gross margins if the iron ore price dips further?
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  If that $92 price tag drops to $80 or $70. Right.
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  At what point does the volume strategy stop working? Is their low unit cost
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  a strong enough shield against a potential global recession in steel?
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  They are running a tight ship, but they are sailing in choppy waters.
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  That is the risk you take with commodities. You can control your shovel,
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  but you can't control the market price. Well said.
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  Well, that gives us plenty to think about. It's certainly rare to see a 500%
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  profit jump in this sector, so kudos to them. Thanks for tuning in to this deep dive.