Fortress Minerals Limited 2Q FY2026 Financial Review: Navigating Resilient Demand Amidst Cost Pressures

Fortress Minerals Limited, listed on the SGX Catalist Board, released its unaudited condensed interim financial statements for the second quarter and six months ended 31 August 2025. The Group remains focused on iron ore exploration, mining, and production, with recent expansion into strategic minerals. This article provides a detailed analysis of key financial metrics, trends, operational developments, and forward-looking commentary for investors.

Key Financial Metrics

*Final dividend of 0.36 US cents/share for FY2025 paid in 2Q FY2026.
**Final dividend of 0.46 US cents/share for FY2024 paid in 2Q FY2025.

Historical Performance Trends

• Revenue Growth: 2Q FY2026 revenue rose 6.4% YoY driven by a higher volume sold (+8.6% DMT), but was partially offset by a 2.4% decline in average selling price due to weaker benchmark iron ore indices.
• Cost Pressures: Cost of sales surged 41.8% YoY, mainly on higher unit production costs (US\$35.71/WMT vs US\$27.44/WMT) attributable to direct materials, blasting, and drilling expenses.
• Gross Profit Margin: Gross profit margin declined to 54.9% from 66.2% in the prior year period, reflecting input cost inflation and reduced pricing power.
• Net Profit: Net profit attributable to owners fell 55.4% YoY, largely due to cost inflation and a drop in other income (notably unrealized FX gains).

Exceptional Earnings and Expenses

• Other income dropped significantly (\$0.3m vs \$1.5m YoY), mainly due to lower unrealized FX gains and absence of one-off contract termination compensation.
• Impairment losses on financial assets were recognized (\$46k in 2Q FY2026) due to expected credit losses on receivables.
• Fair value changes on free options (derivative financial instrument) contributed a gain of \$69k in 2Q FY2026.
• No major asset revaluation or delays were reported.

Directors’ Pay and Related-Party Transactions

• Key management remuneration totaled \$1.06m in 2Q FY2026, down from \$1.28m YoY, comprising directors’ fees, salaries, social security, and contributions to defined plans.
• Related-party lease payments to an entity of a common major shareholder amounted to \$14k for the quarter.

Dividend Review

• Final dividend for FY2025 was \$1.87m (0.36 US cents/share), representing a 21.7% decrease vs prior year’s \$2.4m (0.46 US cents/share).
• No interim dividend declared for the current quarter, citing the need to conserve cash for working capital.

Strategic and Operational Developments

• Offtake Agreements: New 24-month agreements signed for 1.2 million WMT of iron ore concentrate, providing recurring cash flow and earnings stability through FY2027.
• Production Capability: Bukit Besi mine crushing plant completed; commissioning aligned with integrated processing facility targeted for FY2027.
• CASB Mine: Mining lease transferred to a government-linked entity per regulatory changes, but exclusive concessionaire rights retained for 21 years, ensuring operational continuity.
• Expansion: Ongoing construction of processing plants and exploration activities, with notable capex and asset additions during the period.
• Corporate Actions: Several small acquisitions (subsidiaries and associates) and no share dilution, buybacks, or placements in the current period.

Macroeconomic and Industry Trends

• Global steel production is down 1.7% YTD, with China’s output falling 2.8% but imports of iron ore remain robust.
• India and Southeast Asia projected to be growth centers for steel and iron ore demand, offsetting softness in China.
• Tariff and trade uncertainties continue to weigh on regional growth forecasts.

Chairman’s Statement

“The Group remains committed to enhancing production capabilities at the Bukit Besi mine as it services new and ongoing offtake agreements. The construction of a new crushing plant was completed in 1Q FY2026. To optimise operational efficiency, commissioning has been strategically aligned with its integrated processing facility, which is targeted for completion in FY2027. This will further strengthen the Group’s capacity to meet ongoing and future demand.

The Group also continues to advance the development of an integrated processing plant at the CASB mine to enhance production capabilities and support the production of iron ore, copper, and pyrrhotite concentrates. The flowsheet and engineering design for the new plant have been completed. Based on recommendations from consultants, the Group is progressing with the construction of a pilot plant for trial production.

The Group continues to seek opportunities to grow its commodities portfolio in a disciplined manner via acquisitions, investments, joint ventures and/or mining contracting services in Malaysia and the region, leveraging its strong capabilities and partnerships to meet growing demand.

The Group will explore various fund-raising opportunities to enhance its cash balances for operational needs when required. The Group will update shareholders via SGXNET as and when there are any material developments on the aforementioned.”

Tone: The Chairman’s statement is pragmatic and cautiously optimistic, emphasizing operational progress, strategic contracts, ongoing investment, and readiness for fund-raising if needed.

Forecasts and Risks

• Strong regional demand for iron ore is expected to continue, supported by new offtake agreements and ongoing industrialization in India and Southeast Asia.
• Cost inflation and weaker average selling prices are potential headwinds.
• Regulatory changes (CASB lease transfer), while managed, reflect ongoing sectoral risk.
• No forecast or prospect statement was previously published, and the Group is not providing detailed forward guidance in this report.

Conclusion & Investor Recommendations

Overall Performance: Fortress Minerals delivered resilient sales growth and secured future demand via expanded offtake agreements. However, the quarter was marked by sharply higher production costs and lower realized iron ore prices, leading to significant margin compression and a drop in net profit and EPS. Cash conservation appears prudent, given the lack of interim dividend and ongoing capex needs.

• For Existing Shareholders: Hold. Fortress Minerals continues to secure strong demand through long-term contracts and operational investments, but near-term margins are pressured. Investors should monitor cost control measures and progress on new plant commissioning. The Group’s healthy balance sheet and positive working capital provide a buffer, but vigilance is warranted given industry volatility.
• For Prospective Investors: Watch. Fortress Minerals offers exposure to Southeast Asian iron ore growth and is well-positioned for future demand. However, entry timing matters given recent margin compression and cost headwinds. Consider waiting for signs of margin stabilization, successful commissioning of new facilities, or a clearer recovery in iron ore pricing before initiating a position.

Disclaimer: This analysis is strictly based on the company’s published financial report for 2Q FY2026 and does not constitute investment advice. Investors should consider their own financial situation and consult with a professional advisor before making investment decisions.

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