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Fortress Minerals: First Quarter FY2026 Financial Results · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome to the Deep Dive. We're here to sift through the sources and bring you
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  the key insights, nice and quick.
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  Today, we're digging into Fortress Minerals Limited and their first quarter results for FY2026.
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  They're known for iron ore, mostly, but they're branching out into some other interesting areas.
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  Our goal here is really to get under the hood, understand the numbers,
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  the why behind them, and, you know, see where they might be headed.
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  Exactly. And for you listening, we want to make this clear and concise,
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  not just what the numbers are, but why they matter.
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  What do they actually signal about Fortress Minerals' strategy,
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  their market position? We're aiming for clarity, basically. Okay, let's get started then.
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  Fortress Minerals Q1 FY26 results.
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  What's the big picture story here? Revenue looks like it had a pretty significant jump.
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  Oh, absolutely. The top line is, well, quite strong. Impressive, actually.
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  Fortress Minerals reported revenue just shy of U.S. $16 million for the quarter.
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  That's a really substantial increase, over 60 percent compared to the same time
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  last year. 60 percent. Wow.
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  What drove that? Well, it was mainly driven by a huge increase in sales volume.
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  It basically doubled, went from about 96,000 dry metric tons,
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  or DMT, up to nearly 195,000 DMT.
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  That boost came from a key export shipment and just strong local demand continuing.
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  The doubling volume is huge.
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  Usually when volume goes up that much, does that mean prices took a hit?
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  Is there a trade-off? You're right on the money there, yes.
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  While the volume was way up, that gain was, well, partly canceled out by a drop
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  in the average selling price.
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  It decreased by about 18.5%, fell from roughly U.S.
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  $101 per DMT down to about $82, and that dipped. It was mostly tied to weaker
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  international iron ore prices.
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  You know, the benchmark indices softened a bit. Okay, so more tons sold, but less money per ton.
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  Got it. So with that mix, how did it actually affect their profitability?
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  What about gross profit and, you know, bottom line?
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  Right. So gross profit did go up. It increased by a million dollars,
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  hitting U.S. $8.1 million.
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  That's a rise of 13.5 percent. But, and this is really important,
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  the gross profit margin actually fell quite a bit.
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  It dropped by over 22 percent, landing at just under 51 percent for the quarter.
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  Hmm. 22 percent drop in margin. That's significant. So selling more costs them
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  proportionally even more. Exactly.
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  It points to a squeeze on their operational efficiency or maybe just higher
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  input costs catching up.
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  Now, looking at the final profit for the period, they reported U.S. $2.5 million.
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  That's up slightly, about 7.2 percent from the $2.3 million last year.
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  And earnings per share also saw a small bump, 6.8 percent from 0.44 U.S.
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  Cents to 0.47 U.S. cents.
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  So, yeah, profit technically increased, but the margin pressure is the real story there. OK, right.
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  Let's peel back that layer then, because that's where it gets really interesting, isn't the why.
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  We saw that huge jump in the cost of sales, almost 200 percent.
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  Well, that's massive. What was behind that? Yeah, that 195.7% increase in cost
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  of sales, bringing it to U.S.
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  $7.8 million, definitely grabs your attention.
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  The main reason was a big jump, nearly 44% in the average unit cost of sales.
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  It hit U.S. $36.66 per wet metric ton.
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  So think higher production costs, direct materials, more blasting,
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  more drilling needed for that much higher volume.
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  It kind of makes sense. Although it's worth pointing out, while that jump sounds
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  huge compared to last year's Q1, it was only about 10% higher than their average
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  unit cost for the entire previous financial year.
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  So maybe not quite as dramatic in that context.
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  Okay, that context helps. What about other bits and pieces?
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  Other income jumped up too, didn't it? And finance costs went down. Yes, good catch.
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  Other income rose by about U.S. seer 0.6 million dollars. That was mostly unrealized
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  foreign exchange gains.
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  Basically, the Malaysian ringgit strengthened against the U.S.
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  Dollar during the period. So their ringgit holdings look better on paper when translated to U.S.
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  Dollars. And finance costs, yeah, they dipped by U.S. 0.1 million dollars.
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  That's mainly just them paying down some bank borrowings. And taxes.
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  Anything notable there? Their effective tax rate was 29.4 percent,
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  which is, you know, higher than the standard 24 percent corporate rate in Malaysia.
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  That's mostly because some expenses weren't deductible for tax and they had
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  some losses in specific subsidiaries they couldn't offset against profits elsewhere in the group.
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  Pretty standard stuff, really. OK, so we've looked at profit.
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  Now, let's switch gears to cash flow. Cash is king, right?
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  But here, even though profit was up slightly, their cash from operations actually
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  dropped quite a lot. How does that work?
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  It does seem a bit strange at first glance, doesn't it?
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  Higher profit, less cash from ops.
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  Net cash from operating activities fell sharply. It went from U.S.
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  $6.3 million in Q1 last year down to just U.S. $1.3 million this quarter.
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  The main issue was working capital.
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  Specifically, cash inflows were lower. They collected about U.S.
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  $2.6 million less from their customers, their receivables. So maybe customers are paying slower.
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  And at the same time, they paid out U.S. $2.9 million more to their own suppliers,
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  their payables, so paying their bills faster.
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  They did build up inventories by about U.S. $1.1 million, which ties up cash
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  too, but that actually helped offset the outflow slightly.
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  Still a big drop overall. So cash got tighter from the day-to-day business.
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  Yeah. What about how they used cash for bigger things, like investing or financing? Right.
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  Looking at investing activities, they actually used less cash this quarter.
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  Net cash used in investing dropped by U.S. $1.5 million, down to U.S. $1.0 million.
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  Why? Well, they bought fewer short-term financial assets, like money market funds.
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  They didn't repeat a payment for subsidiary shares they made last year.
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  And they spent a bit less on new mining equipment and exploration this quarter
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  compared to last. But, offsetting that slightly, they did make a new strategic
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  investment, buying about U.S.
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  $704 million worth of shares in another company. Interesting. And financing.
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  Borrowing more, paying back debt. Financing saw a big swing.
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  Last year, Q1 used U.S. $2.6 million in cash for financing activities.
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  This year, Q1 actually generated U.S. $1.4 million, the main reason.
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  They took out U.S. $4.8 million in new bank borrowings. Now,
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  they also paid back more on existing loans, about U.S.
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  $1.5 million higher repayments than last year.
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  But the new borrowing still resulted in a net cash inflow from financing.
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  So, yeah, leaning a bit more on debt this quarter.
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  Okay, so that gives us the flow. Now let's look at the snapshot of the balance
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  sheet, assets and liabilities. What stands out to you there? Anything telling?
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  Definitely. If we look at non-current assets, the long-term stuff,
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  that increased by about U.S.
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  $3.9 million, reaching U.S. $77.1 million.
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  You see increases in exploration assets. That's ongoing work at their main mines,
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  Bukit-Baisy and CASB, plus some positive FX effects.
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  Mining properties are up too, mainly FX translation again.
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  And plant and equipment increased by U.S. $1.3 million. That's new construction.
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  Vehicles, again, with some FX help, minus depreciation, of course.
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  And importantly, you see that new equity stake in Norris Minerals,
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  NML, showing up, reflecting those strategic diversification moves we talked
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  about. And on the short-term side, current assets.
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  Current assets also look strong. They rose by U.S.
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  $3.0 million to U.S. $33.0 million. What drove that?
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  Well, inventories were up U.S. $1.1 million, meaning they produced more than
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  they shipped right at the end of the quarter.
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  Other receivables and deposits jumped by U.S. $1.9 million, and that includes a U.S.
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  $1.5 million deposit they put down for that bauxite mining venture in P&G,
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  the strategic venture deal.
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  And cash balances themselves were up by U.S. $1.9 million thanks to that positive,
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  albeit lower, operating cash flow. This was slightly offset by trade receivables dropping by U.S.
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  $2.0 million, which fits with sales maybe being a bit lower in the very last month of the quarter.
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  So putting the current assets and current liabilities together,
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  what does that tell us about their immediate financial health? Their working capital.
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  It tells us they're in a pretty solid position day to day.
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  Their working capital current assets minus current liabilities is positive and actually increased.
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  It went up from U.S. $14.2 million to U.S.
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  $16.0 million. That's a healthy cushion. On the liability side,
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  non-current long-term liabilities only edged up slightly, mostly deferred tax.
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  Current liabilities did increase by U.S. $1.2 million to U.S. $17.0 million.
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  And that reflects those new borrowings we mentioned, asset financing and trade financing drawdowns.
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  But that was partly offset by decent loan repayments and paying down some trade payables.
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  So overall, the balance sheet looks strategically managed. They're investing
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  but keeping things liquid.
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  Okay, let's shift focus now. look ahead. What's the market environment looking
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  like for fortress minerals?
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  And what are the key strategic moves they're making? Well, the market's definitely shifting.
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  Global steel production is kind of flat, maybe slightly down.
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  But the interesting thing is China.
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  Their steel demand isn't just about property anymore, which is struggling.
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  It's shifting towards manufacturing, infrastructure, electric vehicles, green energy projects.
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  And regionally, demand in Southeast Asia is quite strong.
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  Malaysia's economy grew over 4% in the first quarter of 2025.
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  So that provides a pretty resilient base for Fortress Minerals iron ore,
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  especially with recent supply agreements they've signed and the whole decarbonization
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  trend potentially favoring higher grade ore.
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  And operationally. What are the big developments? You mentioned diversification.
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  Yeah, that's a huge theme.
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  Operationally, there are a few key things. First, diversification.
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  That planned 10% stake in the bauxite venture in P&G, strategic venture pre-Deltd.
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  And the investment in Northwest Minerals, NML, for gold exploration in Australia,
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  it's a clear strategy, spread the risk beyond just iron ore.
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  Which makes sense, but adds complexity too.
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  Second, infrastructure. They finished building a new crushing plant at Bukit Bezi this quarter.
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  They're aiming to fully integrate it by FY 2027 to boost efficiency.
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  And at their other main site, CASB, they're developing an integrated processing plant.
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  Design's done, pilot plant's being built, so investing in processing capability. Any hit wins?
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  Regulatory hurdles or anything like that? There are always things to watch.
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  They dealt with a regulatory change where the CASB mining lease was formally
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  transferred to a state-owned entity, Pong Mining Corporation.
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  It seems like an administrative restructuring across the state.
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  Fortress says they still have exclusive rights for two years,
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  plus extension options, so operations continue while they work on longer-term arrangements.
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  It sounds okay, but it's something to monitor. On the challenge side,
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  their exploration work up in Saba is currently on hold.
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  License renewals weren't approved. They're appealing. But for now,
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  resources are shifted elsewhere.
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  It just highlights the risks and realities of the mining business, you know?
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  Definitely. And funding all this, the diversification, the new plans,
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  dealing with challenges, how are they managing the cash for that? What's the plan?
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  They've been using funds raised from a share placement back in April 2023.
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  They got about $8.7 million then. They've used around $6.8 million of that so
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  far, mainly on developing the CASB mine and the CAB exploration costs before they were put on hold.
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  So there's still about S1.8 million left from that pot.
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  Looking ahead to the next quarter, they're projecting about U.S.
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  $9.3 million in total spending.
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  Only a small bit, U.S. $7.2 million, on exploration focused on their producing
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  mines now, with SEBA paused.
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  The big chunk, almost U.S. $7.4 million, is just the cost of sales for the ore
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  they expect to sell, and another U.S.
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  $1.7 million for selling and distribution costs.
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  They state they're still looking for growth opportunities and might raise more
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  funds if needed, so managing cash carefully but still looking to expand. Wow, okay.
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  Quite a journey through their Q1. We've seen Fortress Minerals really pushing
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  forward with strategic expansion, managing strong revenue growth even with those
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  price headwinds, and making disciplined investments.
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  Their financials and diversification efforts certainly give us a lot to think about.
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  Yeah. And if you step back, their story is quite telling, isn't it?
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  It shows how companies in these traditional industries like mining are having to adapt.
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  They're reacting to commodity price swings, sure, but also proactively positioning
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  for future demand in different critical minerals, potentially.
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  And doing this while navigating changing regulations, it really makes you wonder, doesn't it?
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  How will this diversification play out, balancing iron ore with bauxite, maybe gold?
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  How will that reshape their risk, their profitability, especially if these commodity
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  markets keep bouncing around like they do?
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  That's a great question to end on, something for all of us to consider.
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  Thanks for joining us on this deep dive. We hope you keep exploring these fascinating
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  connections between finance, industry, and what's happening globally.
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  Music.