Fortescue halves investment spend

Fortescue Metals Group has ended a tough week for the iron ore sector by halving its projected capital expenditure for the 2015 financial year to $US650 million, in response to the continued weakening of the iron ore price.

In a statement to the ASX late this afternoon, FMG said its production guidance would be maintained at 155 million to 160 million tonnes using its existing mines and infrastructure.

Chief executive Nev Power said in the current environment it was wise to defer investing additional capital that increased supply to the market.

“We will maximise output from our world class mining and infrastructure assets and remain focused on factors within our control to ensure the efficiency of operations and cash discipline to continue the program of early, voluntary debt repayment,” he said.

Mr Power also said deferred projects would be restarted when market conditions improved.

The comments follow presentations by BHP Billiton and Rio Tinto, which both emphasised a focus on low-cost growth opportunities.

This included Rio postponing a final investment decision on its Silvergrass mine in the Pilbara.

The slowdown has hit contractors with Calibre Group this week becoming the latest to downgrade its earnings outlook.

The company said it would be reducing its exploration activities, deferring the detrital processing plant at its Solomon hub, reducing and deferring operational capital expenditure and re-engineering de-watering requirements to cut back on costs.

“Given the advanced stage of development at Anderson Point berth 5, work will continue to complete the project,” FMG said in a statement.

“Fortescue will continue with orders for very large ore carrier ships, with the majority of payments due on delivery scheduled to commence from August 2016.”

The company said it would continue to investigate alternative ownership and funding opportunities for its VLOCs.

Shares in FMG were 2.8 per cent higher at $2.94 per share at the close of trade.