Iron ore miner Fortescue Metals Group has reported strong production results for the June quarter, with output up, costs falling and cash flow improving, giving the company more flexibility as it evaluates potential asset sales.
FMG shipped 25 million tonnes in the June quarter, up 24 per cent compared to the previous three-month period.
It also achieved a 17 per cent reduction in C1 operating costs to $US36.01 per wet metric tonne.
The company received an average sale price of $US113 per dry metric tonne during the June quarter, within its expected longer-term trading range of $US110 to $US130 per tonne.
It said steel production in China remained around record levels, and was confident demand would remain solid.
"These high levels of steel production, improving steel prices and the current low level of iron ore inventory in the system have resulted in recent iron ore re-stocking," the company said.
For the year to June 2013, FMG said it shipped almost 81mt of iron ore, up 41 per cent on the previous year.
It expected to ship between 127mt and 133mt in the 2013-14 financial year.
Chief executive Nev Power said the company was on target to hit a production run rate of 155mtpa by the end of December 2013.
He said FMG was still in negotiations over the possible sale of a minority stake in its Pilbara rail infrastructure, which was designed to bring forward the reduction of its $9.9 billion net debt.
When asked if the company’s improving fortunes had reduced its interest in the sale, Mr Power said conditions in the iron ore market were where the company forecast them to be.
“As we have always said, we don’t need to do this transaction,” Mr Power told journalists.
“We’re in a very strong position ... where we can look at this from an option of degearing more rapidly.”
Chief financial officer Stephen Pearce said the company did not pay any Minerals Resource Rent Tax during the financial year, and did not expect to do so.
“We’re not anticipating paying any MRRT ... we haven’t even booked the tax benefit that is available to us,” he said.
Mr Pearce said there were several contributors to its lower operating costs, including lower strip ratios and operational efficiencies, and he expected the savings were sustainable.
Another factor was cutting support staff - FMG was reported to have cut 1,000 staff and contractor positions last year.
Despite that, its overall employment has grown slightly during the past 12 months to 3,840.
“Overall we have actually increased our numbers as we have moved from construction to operation and as we have brought on new (mine) sites,” Mr Pearce said.
“As we expand (production) we have in fact increased our overall numbers, both at the employee and contractor level.”
Shares in FMG fell 4 cents to $3.64 following the release of the quarterly production report.
Today’s slight weakness follows a one-month bounce in the stock price, from four-year lows of about $2.90 in June.
The company said it had reduced production costs through lower strip ratios, costs savings initiatives and operational efficiencies.
Shares in FMG fell 1.5 cents to $3.66 following the release of the quarterly production report.
