1. What are Fortress Minerals’ competitive strengths in the iron ore mining industry? What is its strategy to manage competition with other players in Malaysia and China?
Fortress Minerals Group is a leading iron ore concentrate producer in Malaysia. The group, led by CEO Ivan Chee, produces magnetite iron ore concentrate mined from the East, Valley and West deposits in the Bukit Besi mine in Terengganu which is primarily sold to steel mills and trading companies in China and Malaysia.
Fortress focuses on producing highgrade magnetite concentrate commanding premium prices, which has seen increasing demand from steel mills.
Our Bukit Besi mine has considerable exploration upside potential and is near to our customers, promoting just-in-time supply at greater cost efficiencies.
We also have a team of professionals comprising geologists, engineers, managers with extensive experience in the mining industry. We believe we are highly competitive in both the domestic and export markets.
To manage this, we are expanding our capacity to meet with continuous high demand from our steel mill customers while expanding our resource base through structural exploration programmes. This enables us to increase our market presence and remain highly competitive.
2. What is unique about Fortress Minerals’ iron ore concentrate? What are the qualities that give your product a competitive edge in the market?
Our focus on high-grade magnetite concentrates that have strong resilient demand and command premium pricing over lower grades provides us with a competitive edge in both domestic and export markets.
Our high-grade magnetite concentrate has seen increasing demand from regional steel mills as steelmakers seek to reduce their greenhouse gas emissions, placing more emphasis on using high-grade magnetite concentrate to increase blast furnace productivity and reduce emissions.
3. Fortress Minerals has recently entered into an “offtake agreement”. What are the advantages of “off-take agreements”?
Our new “off-take agreement” announced in October will allow us to secure sales volume commitment of about 400,000 wet metric tonnes (WMT) from a domestic steel mill for a period from Sept 1 to Aug 31, 2021.
Under this agreement, the pricing will be based on prevailing international market index prices which ensure that Fortress is not disadvantaged in terms of pricing. The successful execution of this agreement shows our high-grade iron ore concentrate is in demand and the strong business relationships we have with our customers.
It also demonstrates our operating efficiencies and capabilities to successfully integrate into our customers’ complex value chains to create mutual benefits in terms of cost and productivity efficiencies.
4. The group’s rights to mine, extract, process and sell iron ore from its Bukit Besi mine is derived from its mining agreement with LTAWNT. These leases are due to expire in early 2033. What is the likelihood of it not being renewed, resulting in the group losing its rights to operate the mine?
Currently, Fortress has two long-life tenements with a total land area of 526.2ha within Bukit Besi which will be subject to renewals only in 2033, 13 years from today.
We remain confident that our Bukit Besi’s mining rights could be renewed for a foreseeable future as our management team has extensive working relationships with the local regulatory authorities and the holder of the mining leases.
In addition, we fully comply with rules and regulations which is crucial for our licence to operate.
This, in turn, enables our group to operate without hindrance and allow us to deliver long-term sustainable return to our shareholders.
5. What are the group’s plans for acquisitions, joint ventures and development of new mines?
We constantly seek opportunities to acquire new mining assets in Malaysia and the region, whether alone or jointly. Where there are opportunities, our in-house geologists will conduct exploration and evaluation activities.
They have been evaluating opportunities in iron ore and other minerals both in Malaysia and the region and we will inform our shareholders at the appropriate time.
6. What is the outlook for iron ore prices? What impact would these price trends have on your operations?
Iron ore prices, especially our highgrade iron ore concentrate, have been performing relatively strong over the past months or so primarily due to the strong demand especially from Chinese steel mills.
While the iron ore price index is determined by market forces, we expect high-grade iron ore concentrate to command a premium over lower grades given its higher iron content and low impurities which enhance steel makers’ productivity.
Since the iron ore price index is beyond our control, our primary focus is to optimise our output and production volume. We continue to expand and increase production throughput efficiency, yielding higher revenues and earnings.
7. Describe Fortress Mineral’s recent financial performance.
We have remained profitable since our listing on the SGX Catalist on March 27, 2019, and we have delivered strong financial results and a solid operational performance.
We believe that our strong results underpinned by our ability to sustain production consistently will serve us well in all market conditions.
In FY2020, our underlying NPAT surpassed US$6.5 million ($8.7 million) with net profit margin of 25.1% and strong gross profit margin of 66.7%. Revenue growth has been strong at 25.7% y-o-y, reaching US$25.9 million with 269,615 DMT of high-grade iron ore sold.
Our stellar results continue into 1HFY2021, with a robust gross profit margin of 75.3%, which translated into record NPAT of US$7.8 million, exceeding FY2020 NPAT by US$1.3 million. Net profit margin for 1HFY2021 was 39.1% with stronger sales achieved and generated a revenue of US$20.1 million representing 77.7% of FY2020’s revenue.
8. What is the group’s current dividend policy? Will the group maintain or change it policy forward?
As stated in our IPO prospectus, we intended to recommend and distribute dividends of not less than 15% and 20% respectively of our group’s NPAT in FY2020 and FY2021 subject to dividend factor as described under dividend policy.
In FY2020, we distributed $2.6 million in dividends equivalent to a payout ratio of 29.30%, exceeding the 15% mentioned for FY2020 in the IPO prospectus.
For 1HFY2021, no interim dividends have been declared but our board of directors remains committed to observing the recommendation published in our IPO prospectus. The board will continue to monitor the group’s business activities and profitability before making any recommendations.
9. Describe Fortress Minerals’ ESG strategy?
Fortress is committed to achieving full compliance with environmental rules and regulations governing our mine operations. In addition, our high-grade magnetite concentrate helps steel mills to reduce emissions by reducing reliance on sintered feed. When managing our workforce, we aim to achieve a safe and healthy work environment for our staff. We strive to improve the quality of life, social and economic development of our communities where we operate. Fortress contributes to the local economy by hiring locals.
10. What do you think investors may have overlooked about Fortress Minerals’ business?
Since our listing in 2019, we have a track record in achieving strong earnings, cash flows and dividends. We are disciplined in cost management and ensure productivity efficiencies across our operations. We produce high-grade magnetite concentrate which command premium prices and have high demand from steel mills. In term of resources, our Joint Iron Reserves Committee (JORC) resource estimate expanded to 7.18 million tonnes as of Feb 29 despite depleted through production and sales.
The iron ore exploration activities at our Bukit Besi mine have been ongoing. We have discovered new resource which can replenish our mined resource and add to our new resource for future mining. We have adopted a low-cost exploration strategy to continuously add new resource net of depletion and extend our Bukit Besi mine life since our IPO in 2019.
