​FMG rejects claims of its need for a partner


Fortescue Metals Group chief executive officer, Andrew "Twiggy" Forrest.

Fortescue has denied claims that its high cost per tonne levels will force it to partner with Chinese firms.
It follows statements by China Metallurgical Industry Planning & Research Institute’s president Xinchuang Li at last week’s Stockbrokers Association of Australia Conference, where he told Australian Mining “with the low iron ore price FMG is in difficult straits financially, so as most of its market is in China it makes long term sense to partner with a Chinese company to increase capacity and help fight high costs”.
These came on the back of speculation Chinese investors were ramping up to take a stake in Fortescue.
FMG head Andrew Forrest told the Australian Financial Review that while he has held talks with investors, he has no intentions of selling his 33 per cent stake in FMG.
Forrest said no new shares would be issued to investors unless the price reflected the company's underlying asset value.
"We are here to build this company up, not sell out of it," he said.
"And no investor has ever been so undiplomatic to suggest a partial sell-down of my own stake as it wouldn't reflect the overriding passion I have for Fortescue, the Pilbara and Australia."
FMG has been under pressure due to the falling price of iron ore, and has been forced to cut thousands of jobs from its Pilbara operations.
Now FMG CFO Stephen Pearce has waded into the discussion, stating that the miner is in a strong position, and has a lower cost per tonne rate than Brazilian iron ore major Vale, with the Pilbara miner looking to drive down its current price from US$41 per tonne to US$39 per tonne by the end of the next financial year.
Vale currently sits at around $US43 per tonne, while Rio Tinto is between US$15 to US$17 per tonne, and BHP pushes out iron ore at a cost close to US$20 per tonne.
"We're right on the tail of the majors in terms of a consistent and comparable operating-cash-cost basis," Pearce told the Sydney Morning Herald.
"With iron ore at a $US60 price and with our costs going to $US18 in 2016, you can see we are making very strong cash margins at these prices. We have $2 billion in the bank and no debt due until 2019, so we are not in any rush to do anything with anyone."
However Vale has been working closely with the Chinese, with Chinese investors set to fund the miner’s massive S11D project which is set to add a further 90 million tonnes a year to the seaborne iron ore market, adding to the current supply versus demand issues plaguing the market.

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