Fortescue’s March production report is out is clearly the worst of the big three:
Completion of US$9.2 billion expansion of port, rail and mining operations to achieve production capacity of 155mtpa.
• The 40mtpa Kings Valley project was opened in March 2014 following commissioning of the ore processing facility (OPF) which was constructed in record time, taking only 179 days from assembly of first steel to completion.
• Achieved targeted 155 million tonne (mt) per annum annualised rate during March 2014.
• Record shipments of 31.5mt achieved in the March 2014 quarter, lifting financial year-to-date shipments to 85.4mt,
a 53 per cent increase over the prior comparable period.
• C1 costs of US$34.88/wmt in line with guidance of US$34/wmt for FY14 reflecting low cost Solomon tonnes and operational efficiencies.
• Successful execution of debt reduction programs have resulted in debt repayments of US$3.1 billion to date and a commitment to reduce gearing to an initial target of 40 per cent.
• Cash on hand was US$1.9 billion at the end of March 2014 reflecting the continued strength of operational cash flows, disciplined capital management and lower finance costs following debt repayments.
• Achieved realised CFR price of US$107 per dry metric tonne (dmt), based on an average 62% Platts CFR index price of US$120/dmt.
Shipments of 31.5 million tonnes (mt) is well short of nameplate production of 155mt and 85.4mt is miles short of its planned 127mt for the year.
According to the AFR:
The miner believes it can run its operations at “sprint” capacity during the June quarter to ensure the full-year target of 127 million tonnes is met.
That will require Fortescue to ship a massive 41.6 million tonnes in the June quarter; a rise of about 32 per cent above the 31.5 million tonnes that were shipped in the March quarter.
Perhaps it can, but it can’t do it without inundating the market. Rio’s first quarter was also some 25mt annunalised short of expected output. In short, the two iron ore majors have another 54 million tonnes of capacity (another India!) yet to be deployed in the great deluge of the first half.
There’s no iron ore price recovery coming.
