Continual growth in exports by iron ore miner Fortescue Metals Group has lifted its tonnage by 15 per cent in the March 2014 quarter.
The big Australian mining company shipped 30.8 million tonnes of iron ore in the three months to March.
Mining efficiencies make Fortescue more profitable
When you consider the size of Western Australian mining operations and realise the number of mining companies operating within the Pilbara region, its staggering to realise that miners like Fortescue are continuing to break export records.
“make existing mines more efficient and cost effective”
During the latter pat of 2013, mining in Australia changed forever as investment in new projects slowed and mining companies started to analyse their mining processes. The focus was on cost reduction and diverting funding that was once allocated to new mine development, into implementing new ways to make existing mines more efficient and cost effective.
Fortescue Metals Group, (FMG) under the guidance of their enigmatic founder Andrew ‘Ziggy’ Forest, were once thought of as one of mining’s underdogs. Heavily laden with debt and a history of internal problems, Fortescue struggled to keep their head above water, especially as the price of iron ore tumbled in line with a reduction in global demand for raw iron ore.
“an impressive development program”
However, Fortescue embarked on an aggressive program to roll out new technology as well as shed those old processes that were dragging the company under. Not only did Fortescue Metals Group bring their financial management systems under control, they embarked on an impressive development program, building new mines in the Chichester Ranges of the Pilbara.
The result of this meant†new development†at four mines in two separate regions of the Pilbara, the Chichester Hub and Solomon Hub. Each hub contains 2 separate mining operations, Firetail and Kings mine in the† Solomon Hub and Cloudbreak and Christmas Creek, which is about 40 kilometres east of Cloudbreak, in the Chichester Hub.
The Solomon Hub is located close to Tom Price whereas the Chichester Hub is about 100 kilometers north of Newman. Both mining hubs are connected via a purpose-built rail network, which interlinks to a main line direct to Herb Elliot Port, where the iron ore is loaded onto bulk carriers ready for export.
Fortescue lifts its iron ore production
Fortescue’s iron ore shipments from the Pilbara increased by a whopping 59 per cent from 19.4 million tonnes in the same quarter of 2013. At the same time, Fortescue’s costs increased six per cent in the quarter to $US34.88 per wet metric tonne, from $US32.99 in the December quarter.
This is still a good result considering the buy price of iron ore at the latter part of April 2014 is around $110 a tonne. Fortescue achieved a realised iron ore price of US$107 per dry metric tonne in the March quarter.
The increased costs were the accumulation of the ramp-up of mining operations at the Kings Valley mine and WA’s wet weather†which adversely affected†the Chichester and Solomon Hubs.
Fortescue said the completion of the Kings Valley project during the March quarter lifted its iron ore production capacity to 155 million tonnes per year.
In a statement, Fortescue said it had plans to ship 41.6 million tonnes in the June 2014 quarter, which would give them about 127 million tonnes of production in the financial period for 2014. The addition of 100 million tonnes of capacity completed in a record time-frame had allowed Fortescue to supply increased tonnes into a strong iron ore market.
“short term volatility in the March quarter”
It’s no secret the iron ore market has been quite volatile over the last 12 to 18 months and Fortescue have also voiced their acceptance of this, although the mining company viewed China’s demand for iron ore†as remaining strong with the Chinese government committed to continued economic growth and urbanisation.
Fortescue focuses on debt reduction
Fortescue has made a strong commitment to reduce its debt and has been proactive in making repayments of US$3.1 billion to date,†saying it will reduce gearing to 40 per cent.
Fortescue’s net debt around March 31 was about US$7.7 billion. This included finance leases to the tune of US$300 million. Cash on hand was $US1.9 billion ($A2.04 billion) at the end of March.
Mining jobs with Fortescue Metals Group
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