FMG cuts costs, lifts iron ore export target

Fortescue Metals Group says it will bring its break even costs down to $US39 a tonne as it plans to ship 5 million tonnes more of iron ore.

In its third quarter report, FMG announced shipments during the quarter were 40.4mt, 28 per cent higher than the prior comparable period and slightly ahead of guidance.

The increase came as the company mined 35.5mt of ore, 19 per cent less than the previous quarter but 20 per cent higher than the prior comparable period.

FMG increased its shipping target to between 160 and 165 million tonnes of iron ore, up from its previous target of 155 to 160 million tonnes.

Continuing its attack on costs in light of the depressed iron ore price, FMG said its C1 costs in the March quarter averaged US$25.90 per wet metric tonne, a nine per cent improvement over the prior quarter and 26 per cent lower than the prior comparable period

Fortescue’s total delivered cost to customers has also continued to decrease and was US$34/wmt inclusive of C1 and shipping, royalty and administration costs, 17 per cent lower than the prior quarter.

The miner lowered its C1 cost guidance for 2016 to US$18/wmt which it said would result in a total delivered cost to China of US$25/wmt.

FMG said the cost-cutting would be driven by ongoing mining efficiency and productivity, procurement savings, the supply of natural gas to the Solomon Hub, and labour productivity improvements.

The company has been forced to search for cost savings as the iron ore price dips to levels not seen in over seven years, putting pressure on its margins.

FMG’s CEO Nev Power once again hit out at major iron ore miners Rio Tinto and BHP Billiton for flooding the market with new supply which he said it working to bring down the iron ore price.

Power went as far to suggest that governments step in to manage what he called an industry disaster.

"I'm not sure what they (BHP and Rio) are doing," Power said. 

"But the current state of the iron ore industry has been a disaster for everyone. It has ripped the heart out of the industry, the heart out of the suppliers and contractors for the industries, the heart out of communities. There are no winners, only losers.

"It impacts everyone in Australia, whether you work in iron ore or not, because of the massive impact that the iron ore industry has on the economy. So I think there is an absolute issue here of public interest, to try and make sure there is the maximum amount of value (created) that we can in the industry." 

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