C1 costs rose by 4% to US$13.06 per wet metric tonne, up from the record $12.54/wmt in the previous period.

The cost rise was due to a 6% fall in shipments to 39.6 million tonnes.

Full-year guidance remains unchanged at 165-170Mt at C1 costs of $12-13/t.

Despite a surge in pricing over the quarter, the average received price of $65 per dry metric tonne was in line with the previous quarter due to a widening of the spread between in prices between iron ore grades.

The company achieved a price realisation of just 76%, down from 91.7%, and adjusted its full-year guidance to 75-85% from 85-87%.

Macquarie analyst Hayden Bairstow said the result was solid, but was offset by weaker pricing.

“We note that the fall compared to the 2QFY17 number was elevated due to the absence of provisional pricing benefits however the reduction in near-term price discounting is disappointing,” he said.

“That said, the stock continues to look attractive on cashflow yields under a spot price scenario.”-

FMG generated strong cashflow during the period, which allowed it to repay $1 billion of debt.

It reduced gross debt to $4.3 billion, reducing gross gearing to 31% and net gearing to 22%.

The iron ore spot price has fallen by more than 16% over the past five days, including by 8.5% overnight.

As a result, FMG shares were heavily sold down, and were last trading 7.3% lower at A$5.47.

Macquarie maintained its outperform rating and $6.80 price target.