Markets: Fortescue hits the volume

Fortescue’s iron ore production rose to a record level while its costs fell nearly a fifth in the three months to June 30 as it remained on track to increase iron ore output to 155 million tonnes per annum by the end of this year.

The Perth based miner, whose chairman is billionaire Andrew Forrest, says in an ASX statement that total ore shipped, including that of third party tonnage, was 25 million wet tonnes in the second quarter, up 24 per cent from 20.2 million wet tonnes in the three months to March 31.

Fortescue’s total direct costs were $US36.01 a tonne, a 17 per cent decrease from $US43.61. The company said on average it got $US113 per dry tonne for its iron ore.

At 1125 AEST Fortescue shares dropped 1.5 cents, or 0.4 per cent, to $3.665. The stock is down 21 per cent this year. The sport price for iron ore imported through the northeast Chinese city of Tianjin has fallen 9.3 per cent this year. Fortescue sells almost all its iron ore to Chinese steel mills. In its 2013 financial year the company paid no mining resources rent tax.

The Tianjin iron ore spot price yesterday fell US20 cents, or 0.2 per cent, to $US131.50 a tonne. It is up 19 per cent since May 31 when it was $US110.40.  

Fortescue says in its 2014 financial year it expects iron ore output to be from 127-133 million tonnes. The company has $US12.7 billion in debt and cash of $US2.2 billion.

The iron ore miner, whose operations are in the Pilbara region of northwest Western Australia at sites named Chichester and Solomon, spent $US6.2 billion on expanding its iron ore production, funding capital projects, exploration and fleet in its 2013 financial year.

In 2014 Fortescue expects to spend $US1.9 billion. Total spending on increasing its iron ore production to 155 million tonnes per year is still forecast to be $US9 billion, excluding spending on its fleet.