MELBOURNE - Australia's Fortescue warned on Thursday its operations could be hit if talks with China's State-backed buyer did not conclude by year-end, as the world's fourth-largest iron-ore miner released results that showed sales lagging shipments.

Fortescue has been locked in negotiations with China Mineral Resources Group (CMRG) this year, as the Chinese buyers seeks to lever China's size to secure better terms for its steelmakers, which have faced thin margins and weak domestic demand.

Earlier this year, Reuters reported that CMRG notified some mills verbally that they must not agree to take delivery of Fortescue's flagship iron-ore product during annual supply talks. Fortescue has been stockpiling ore at ports while negotiating with China's State buyer.

Earlier this month, the miner also said that its cash balance had fallen 37%.

In its quarterly production report, Fortescue kept its full-year 2027 forecast for iron ore shipments unchanged, likewise for its estimates of C1 unit costs for hematite and metals capital expenditure, but said the numbers were subject to negotiations with CMRG.

"If negotiations with CMRG are not concluded by calendar year-end, operations may be affected," the miner said.

Australia is the world's biggest supplier of iron-ore and its iron-ore majors have all faced challenges with CMRG. Rio Tinto has agreed a new deal with CMRG, people familiar with the matter told Reuters on Wednesday.

Fortescue's iron-ore sales stood at 42.9-million metric tons for the first quarter, less than anticipated by analysts, and was more than 9% below iron-ore shipments of 46.8-million tons, partly owing to maintenance activities. That compared with 49.7-million tons shipped a year ago and a Visible Alpha consensus estimate of 47.5-million tons.

Fortescue also flagged rising costs. Higher diesel prices, which added $1.40 per wet metric ton from a year before, together with inflationary pressures and lower supply-chain volumes, drove C1 unit costs of hematite iron up by 13% during the quarter.

The miner forecasts iron-ore shipments of 197-million to 207-million tons, including 11-million to 14-million tons from Iron Bridge for full-year 2027.

The miner said on Wednesday it had fired a senior executive following an investigation into allegations of sexual harassment and bullying.

Fortescue shares fell as much as 2.4% to A$14.90, their lowest level since June 2025, while the broader S&P/ASX 200 index  benchmark was down 0.5%.