FMG CEO Nev Power joins Barnett in Rio Tinto, BHP fight

Fortescue Metals Group chief Nev Power said he understands Western Australia Premier Colin Barnett's frustration at Rio and BHP over their iron ore expansion plans.

Barnett took several swipes at the state’s biggest miners over the last week.

First he told them to “remember who you landlord is” while questioning their strategy of increasing iron ore supply into a sluggish market.

While on Tuesday the comments became more heated, with the premier stating the business policy being employed by the miners was flawed and accusing the miners of working “in concert”.

Power agrees that the strategy being employed by BHP and Rio is not the right one, SMH reported.

"I think it very understandable to hear the Premier's frustration because there seemed to be a rhetoric suggesting that the strategy was to trash the market and then somehow make returns after that," Power said.

"But I think everybody would know that is a flawed strategy that has been tried by people for countless years with little success."

Power said the strategies could see the heads of top companies roll if shareholders lose out.

“Investing because you’re more profitable than the next guy seems to be a very flawed strategy to me and one that will inevitably lead to self-inflicted wounds, low returns to shareholders, and probably replacement of management teams like we’ve seen in some of those companies in the past," Power said.

“When there are higher returns in the future by investing we should invest, and when we don’t see those incentive prices and returns we should not be investing."

Defending FMG’s own expansion plans, Power said they were signed off in 2010 when “none of them were interested in expansions, they were all very happy that they had a cosy oligopoly in the market, and frankly, did their damndest to stop us from developing our business."

“I’m not quite sure why anyone would want to be the last man standing in a low price, low return environment,”  Power said.

“For me, what we’re interested in in the iron ore industry is ensuring we’ve got high returns to our shareholders.

"The reason we developed our business in the first place is that no one else was developing the iron ore supply."

FMG is on track to produce 160 million tonnes of iron ore this year.

Earlier this week, Power said BHP and Rio Tinto had taken a "scorched earth" approach in their expansion plans

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