Fortescue production costs to fall even further in FY17

JOHANNESBURG (miningweekly.com) – Australia’s third-largest iron-ore producer, Fortescue Metals, has lowered its cash production costs (C1) for the tenth consecutive quarter to $14.31 a wet metric tonne (wmt) in the three months ended June 30, while hitting another shipping record.

Fortescue shipped 43.4-million tonnes in the final quarter of the 2016 financial year, which is a 3% increase on the third-quarter shipments and a 2% increase on the shipments of the comparative period in 2015.

C1 cash costs were lowered by 3% quarter-on-quarter and, when compared with the production costs of a year earlier, Fortescue achieved a 35% cost reduction over the 12-month period.

CEO Nev Power said on Wednesday that C1 costs would be lowered even further in the 2017 financial year, as the group continued its focus on productivity and efficiency measures. The company is targeting C1 cash costs of between $12/wmt and $13/wmt in 2017.

Fortescue will target shipments of between 165-million tonnes and 170-million tonnes in the 2017 financial year.  The company shipped 169.4-million tonnes in the 2016 financial year.

Fortescue increased its ore production to 47.8-million tonnes in the June quarter, compared with 43.4-million in the March quarter and 42.1-million tonnes in the fourth quarter of 2015.

The company reported that iron-ore and steel markets were positive in the June quarter, noting that increased Chinese demand from the property and steel sectors, together with low inventory and strong exports, had supported steel production. These combined effects increased the average Plats 62 CFR index iron-ore price by 15% quarter-on-quarter to $55.66 a dry metric tonne (dmt).

Fortescue achieved an average realised price of $48.79/dmt in the June quarter.

Meanwhile, Power reported that the group had managed to make additional debt repayments in the quarter, with net debt lowered to $5.2-billion at the end of June.

“We are fast approaching our initial balance sheet targets and will continue to apply cash flows to further reduce debt,” he said.

Shares in Fortescue advanced 7% on Wednesday to trade at A$4.41 apiece in the late afternoon, giving the company a market capitalisation of A$13.73-billion.