Our Nev bluffs it out

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Its a brave from FMG’s Nev Power today. From the AFR:

Fortescue Metals Group chief executive Neville Power says Gina Rinehart’s Roy Hill project won’t stop his company or BHP Billiton from ramping up exports out or Port Hedland.

…“The port is currently under-utilitised and even with Gina Rinehart’s additional tonnes, they are not going to have any material affect on our exports.”

…“I’m not concerned about Gina Rinehart coming in. It is good for Australia, for sure. And while it is another competitor, it doesn’t make that big of an impact. We think it is good for Australia in that it is being developed here and not anywhere else.”

He added that the Australian mining sector is entering its most exciting phase in terms of revenue, with the “construction phase coming to an end but the production boom just starting”.

The bigger issue is not port capacity, it’s price as 55 million extra tonnes hits a saturated market and could be worth as much as $20 to spot (given Mac Bank once estimated that the removal of 50 mtpa of Indian ore added $20 in tight market). Also from the AFR

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“There will always be short-term volatility but not anything that we are concerned about long term,” he said.

“The key with all of these resource projects is being well positioned on the global supply curve. We are very comfortable with how we are positioned. A $US100-a-tonne iron ore price or sub $US100 a tonne is OK, particularly as we repay further debt.”

Credit Suisse head of Australian equity sales Chris Mayne said as long as the iron ore price stays relatively stable over the next 12 months, Fortescue should be able to meet its target of repaying $1 billion in debt by this calendar year.

If you’re not concerned, Nev, then why are you paying down debt at such a furious rate?

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.