Via UBS:
Innovation projects for FY 18 announced
FMG has provided an update on its continued investment in projects to improve safety, productivity and efficiency. Productivity initiatives to include: 1) further roll-out of autonomous haulage technology (AHS or driverless trucks) at the Solomon Hub, 2) rollout of AHS across the Chichester Hub from FY 18 (~100 trucks to be converted to AHS), and 3) trial of an overland conveyor. These initiatives are targeted at combatting the issue of rising costs associated with rising strip ratios. The investment is over 3 years (FY 18-20) and while not quantified today, is expected to be within the sustaining capital spend which we assume rises from US$2/t in FY 17 to US$3.00-3.50/t in FY 18 and long run of US$4/t. The biggest issue around an investment in FMG today is the discount for low grade iron ore and whether it is structural or cyclical. We estimate a 25% discount is priced into the stock today.
