As global iron ore prices settled above $US100 a tonne for the first time in five years Fortescue Metals Group has announced the second new mine in a year in its Pilbara operational area in WA.
Fortescue says it will spend more than $A400 million on the project – a cost that will take the total investment announced in the past year by Fortescue to more than $A2 billion, and close to $A6 billion with a third project that is in the planning stage.
The development of the Queens Valley mining are is part of the world’s No.4 iron ore miner’s plan to boost margins through higher grade products.
“The Queens mining area development will maintain our highly valued Kings Fines low-alumina sinter fines product which supplies Fortescue’s key customers in China as well as in Japan and Korea,” CEO Elizabeth Gaines said in a statement on Wednesday.
The shares fell by more than 8% to $8.27, not because of the new mine news but because they went ex-the special 60 cent dividend announced last week.
Fortescue has been attempting to shore up demand by moving to produce higher grade iron ore, given that its lower grade products had fallen out of favour with Chinese buyers facing environmental restrictions.
Last year Fortescue announced the spending of more than $A1.6 billion on the new Eliwana mine that will have a total capacity of 30 million tonnes a year and be in operation by December 2020. It is designed to produce ore with a grade around 60% Fe.
In April this year, the miner said it would spend about $US2.6 billion ($A3.9 billion) with a Taiwanese partner to develop a “premium product” iron ore project in WA That’s based on magnetite products and has yet to get the green light.
The Queens development is estimated to have a life of 10 to 15 years.
The miner has obtained environmental and heritage approvals to start work on the project.
