27/12/2012 - 10:00

Fortescue to restart work at Kings

27/12/2012 - 10:00

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Fortescue Metals Group will restart work at its Kings deposit in the Pilbara on the back of rising iron ore prices and an improving market outlook.

The company had deferred work at the deposit, located at the Solomon mine, in September in response to volatile market conditions, which saw the price of iron ore slump to below $US90 a tonne.

Fortescue said the resumption of work at Kings will deliver an extra 40 million tonnes per annum (mtpa), lifting the company's production capacity to 155mtpa by the end of calendar 2013.

“The recent improvement in iron ore prices and market outlook, along with a number of measures undertaken by Fortescue, including the sale of non-core assets, a reduction in operating costs and the restructuring of existing bank facilities, underpinned the decision to complete Kings in the new year,” the company said in a statement.

Iron ore prices have rebounded to $US135 a tonne.

Fortescue this month reaped $190 million from the sale of part of its share in the Nullagine joint venture with BC Iron, leaving the miner with 25 per cent. Fortescue has also started the process to sell a minority interest in its port and rail assets.

Construction workers at the nearby Firetail deposit will be redeployed to Kings, to enable a “smooth transition”, Fortescue said.

Production at Firetail will ramp up to 20mtpa by the end of the March quarter.

Chief executive Nev Power said the board had carefully considered current market conditions before making its decision to resume work.

“We’ve made outstanding progress with the expansion of our Chichester operations and the development of the low cost Firetail mine,” he said.

“We can now turn our attention to Kings, which will deliver Fortescue an additional 40mtpa of low cost production by December 2013.”

Shares in Fortescue closed at $4.53, up from $4.35 from the previous trading day. 

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