Blowout no deterrent to FMG
18th Jul 2012
JULY 18 – Fortescue Metals has revealed a $US600M increase in the costs of its ambitious Pilbara, Western Australia expansion plans but says it won’t prevent it reaching its targeted 155Mtpa production rate within 12 months.
Australia’s third largest iron ore miner achieved total sales of 55.8Mt for the financial year ended June 30, 2012, a 40% increase on the FY11 result.
Shipments for the June quarter (Q4) were a record 17.8Mt, up 42% on Q3, equating to 71Mtpa.
The company says a major review of the T155 project has confirmed delivery schedules, with the $1B Christmas Creek Phase 2 expansion due to reach 50Mtpa capacity over the December quarter and the $3.2B Solomon 60Mtpa mine in the March and June 2013 quarters.
The cost of the expansion budget has risen 7% to $9B, including the previously reported $200M increase on port and rail infrastructure due to the need for additional accommodation and cyclone recovery works, a $100M decrease for Chichester Hub projects and $500m increase at Solomon.
As well as general price increases, Solomon is impacted by design and scope changes arising from refined mining flow sheets, additional port costs resulting from delays in offloading preassembled equipment at Port Hedland and increased site housing costs to enable a shorter delivery schedule.
Fortescue is continuing discussions with the Port Hedland Port Authority on its application to construct a fifth berth, which if approved will add an estimated $250M to the overall cost.
Beyond T155, the company has identified the FMG Iron Bridge joint venture (FMG 88%, Shanghai Baosteel Group 12%) with its adjoining, 2.4Bt North Star and Glacier Valley tenements and the 2Bt-plus Nyidinghu deposit. Fortescue says it aims to have the projects “push button ready” for development once it has consolidated production at the 155Mtpa level.
Total ore mined in Q4 was 19.2M wet metric tonnes (Q3 13.6Mt), with overburden removed 81.1t (59.7Mt). Ore processed was 15.7Mt (11.7Mt) and total ore shipped was 17.8Mt (12.6Mt), including 0.7Mt third party ore.
Q4 mining operations produced 19.2Mt, up 41% from the rain affected March quarter. While routine maintenance in early July will ease production from recent levels, Fortescue intends to maintain the 60Mtpa rate for the September quarter before the substantial ramp-up of production in the December quarter.
Cash costs declined sharply to $46.04/t (Q3 $52.56) due to the scale benefits of higher production, lower exchange rate and slightly lower strip ratio. FY12 C1 cost was $48/t.
The average cost and freight realised sales price was $125/dry tonne (Q3 $126), compared to the average 62% Fe Index price of $141/dt.
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