Fortescue upgrades Solomon resource

Fortescue Metals Group has upgraded the resource estimates at its Solomon project in Western Australia's Pilbara region.

Fortescue said it had increased the Solomon resources by 160 million tonnes, to 2.86 billion tonnes.

"This resource upgrade further develops the Solomon Stage 1 feasibility study for a major mining operation within the Solomon Hub," Fortescue told the stock exchange on Thursday.

Fortescue said 861 million tonnes (Mt) of mineralisation at the project had now been upgraded to indicated and measured status.

"Reserve studies are being progressed to confirm the production targets under the DFS (definitive feasibility study) program with an initial reserve estimate target in excess of 500Mt," Fortescue told the stock exchange.

It said the first measured resource of Brockman ore had increased at Solomon to 108Mt, up from 42Mt.

An additional 27Mt had been added to the project's indicated resource, bringing that total to 750Mt.

Meanwhile, FMG had a bumper June quarter, increasing production by 10 per cent, which the iron ore company attributed to higher prices and no shutdowns.

The Pilbara miner produced 11.4 million tonnes in the three months to June 30, up 10 per cent from the March quarter, and 28 per cent from the corresponding period of 2009.

Ore shipped jumped 13 per cent to 11 million tonnes.

The company said: "Previous company guidance indicated an operating capacity of around 40 million tones until the Christmas Creek expansion comes on stream in the March 2011 quarter.

"However, with higher iron ore prices, no maintenance shutdowns and a determined management team, the result was a performance level of double digit growth."

The September quarter should see a decrease in production, with two scheduled shutdowns set to impact 10 days of production.

"Against this backdrop, management is targeting a quarterly production result of between nine, to 10 million tonnes, however, all efforts will be made to bring actual production in at the higher end of this range," Fortescue said.

Costs were up about $2.80 per tonne to $32.25.

Chief financial officer Stephen Pearce said the cost rise came about because of a production increase to meet higher iron ore prices, which moved from a contract system in the quarter to indexed prices.

"During the June quarter we made a deliberate decision to maximise the number of tonnes produced and shipped," Mr Pearce said.

"The additional margin on these additional tones, given the price received for the quarter, made it a very easy and sound decision."

Shares in Fortescue fell 18 cents, or 4.11 per cent, to close at $4.20.