Third quarter slump

Fortescue Metals has slashed its full-year sales forecast by 15% to 26 million tonnes following slower production and a steep fall in third quarter earnings.

Fortescue Metals has slashed its full-year sales forecast by 15% to 26 million tonnes following slower production and a steep fall in third quarter earnings, the company said in an announcement to the Australian Securities Exchange.

The company’s third quarter earnings fell 66% to US$63 million as falling iron ore prices and poor weather significantly slowed production.

The 6.2 million tonnes of iron ore Fortescue shipped in the March quarter was down from 8.46 million tonnes shipped in the previous quarter, and also down on its projected targets for the period.

“The mining ramp up program was well under target with 6.55 million tonnes produced in the quarter, down 22% on December quarter due to the combined impact of a deliberate scale back of drill and blast generated ore and the adverse impact of heavy rains,” the company said.

“The adverse operating conditions over the March quarter will impact on the full year results as Fortescue will not be able to catch up lost production.”

According to Fortescue, a further problem that has contributed to a cut in sales is increasing production costs.

“A cost review program was initiated during the quarter with clear recognition that the per tonne cost of production is too high, requiring a greater focus on margin” the company said.

Operating costs per tonne of ore mined rose from $US26.55 to $US32.02 on the previous quarter as wet weather increased the dampness of feedstock.

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