Fortescue Metals Group has downgraded its iron ore production targets and pushed back the timing of its asset sale.
Full year shipped iron ore is anticipated to hit between 80 to 82 million wet metric tonnes, down from predictions of 82 to 84 million tonnes.
Fortescue yesterday announced they will make swift and permanent reductions to operations costs in an effort to strengthen the company’s financial position.
Investors’ calls for Fortescue to reduce its $US10 billion debt are fuelling the company’s move to offload its minority interest in its port and rail assets which are expected to deliver $US3 billion to the company.
The sale, which was expected to be finalised by June 30, has been pushed to the September quarter.
FMG said it expects strong demand for iron ore to continue, tipping prices to range from $US110 to $US130 a tonne.
“We continue to see strong demand for our products. China’s economic growth and long term demand for iron ore is unchanged,” FMG CEO Nev Power said.
But new manufacturing data suggests a slowdown of the Chinese economy, dropping to a nine month low in June.
Fortescue’s expansion spending is coming to an end which the company said will free up more cash flow.
''Fortescue is now in a phase of significant cost reduction and continues to focus on operational efficiencies which will see it moving down the global cost curve,'' the company said in a statement.
Looking ahead to the 2014 financial year, FMG has set total ore shipped targets expecting it to be between 127 to 133 million wet tonnes.
Capital expenditure for FY2014 is expected to be $US1.9 billion representing a significant decrease on FY2013 which is currently estimated to be $US6.3 billion.
Decreasing capital expenditure and ramping up production will assist Fortescue to move down the cost curve, Power explained.
“Fortescue will enter the first of half of FY2014 poised to complete the fastest major expansion in the iron ore industry,” he said.
The company expects production capacity to triple to 155 million tonnes per annum.