Fortescue Metals Group cuts costs

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Iron ore miner Fortescue Metals Group (FMG) has released its September 2015 Quarterly Production Report, revealing that it has once more slashed its operating costs in order to battle the plummeting iron ore price.

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The company’s report revealed that FMG has cut its C1 operating costs by 24 per cent to $US16.90 per wet metric tonne compared to $US22.16 in the previous quarter.

According to the media release, operational efficiencies and sustainable cost reductions, together with strong price realisation, continued to generate improved operating cash flows. As a result, the miner said it had been able to repurchase $US384 million of debt on market while also increasing cash balances to $US2.6 billion.

“The results demonstrate Fortescue’s ongoing commitment to consistent, sustained high performance across the entire business. Our team is continuing to deliver sustainable cost reductions through an unwavering focus on optimising every aspect of Fortescue’s operations. This has resulted in production costs being driven lower for the seventh consecutive quarter, down by 47 percent compared to the September 2014 quarter,” said Chief Executive Officer, Nev Power.

For the 2016 financial year, the company is targeting production of 165 million tonnes, at a production cost of US$18 per tonne.

“Fortescue’s strong operating cash flows and sustained cost management have allowed us to take advantage of market conditions to reduce our debt and lower our interest costs, ensuring the company is extremely well placed in the current market. Fortescue’s debt structure has high levels of flexibility and no maintenance covenants. These on market debt reductions are in line with our long term debt reduction strategy reducing interest costs and lowering gearing,” added Chief Financial Officer, Stephen Pearce.

Last week, the company responded to media speculation regarding the sale of a minority stake in its assets, stating that it had not reached an agreement with any party.

Six months ago, FMG was forced to undertake a thorough organisational review and bring work rosters across its operations into line with the standard rosters worked in the Pilbara iron ore industry due to the ongoing instability in the iron ore market.