According to media reports, Fortescue Metals (FMG) only just broke even in the September quarter as prices for its lower quality iron ore fell.
Fairfax Media reports that the company achieved a price of $US71 a tonne as it delivered yet another shipment record.
According to Fairfax, investment bank UBS claimed Fortescue needs a breakeven price of $US71 a tonne, at an exchange rate of 87 USc, to cover all cash outgoings.
The exchange rate averaged 93c in the September quarter, allowing Fortescue, the third-biggest producer in the Pilbara, to scrape breakeven, according to Fairfax Media’s report.
But Fortescue said in its production report that its so-called C1 costs for the September quarter were $US32.08 a wet metric tonne, an improvement of 6% on the prior quarter. (C1 costs are the basic getting the ore out of the ground and processed at the mine costs.)
“In the September 2014 quarter, total delivered costs to customers was $US45 a wet metric tonne, inclusive of C1 cost and shipping, royalty and administration costs, eight per cent lower than the prior quarter and 12 per cent lower than the prior comparable quarter,” the company said.
Fortescue said its shipping hit an annual rate of 166 million tonnes in the quarter, well ahead of its target of 155 million tonnes.
Fortescue said its equity share of shipments for the September quarter was 40.9 million tonnes, up 66% on the 24.7 million tonnes at the same time last year.
Total ore shipped was 41.5 million tonnes, including product owned by joint venture partner BC Iron. The miner took $US71 a tonne for its ore, against a benchmark price of $US90 a tonne.
FMG YTD – Production soars as prices drop
Fortescue has guided for production of 155 million tonnes to 160 million tonnes for the current financial year (ending June 30, 2015). Fortescue shares fell 4.4% to $3.48. A fall of 1.5% in the spot iron ore price overnight to $US82.55 didn’t help sentiment towards Fortescue yesterday.
The company says it plans to make an unscheduled $US500 million repayment of its debt later today. Net debt was $US6.9 billion before the repayment.
Fortescue said cash on hand increased to $US2.6 billion at the end of September.
