fmg delivers $1bn 1half-year profit

FMG delivers $1bn half-year profit
30-January-09 by AAP & Mark Beyer



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Iron ore miner Fortescue Metals Group has booked a $1.1 billion net profit in its first full half-year of mining, though in line with previous periods its result has more to do with accounting adjustments than mining operations.

The profit for the six months ended December 31 followed a $1.06 billion loss in the previous corresponding period.

In both periods, the main influence on the results was an adjustment to the fair value of subordinated loan notes.

During the latest half year, Fortescue also incurred a $74 million loss related to its shipping business.

"It would be wrong for me to say we haven't been challenged," executive director Graeme Rowley said during a a teleconference on Friday.

Revenue for the first half of 2008/09 was $1.464 billion, compared to nil previously.

Earnings before interest, tax, depreciation and amortisation, excluding the shipping loss, was $715 million.

Mr Rowley said the company had $439 million cash on hand at the end of December.

Meantime, in its quarterly report released today, the miner said it will target output of 23.8 million tonnes from its Cloud Break mine in the Pilbara during the second half, giving it full year production of 39 Mt.

"The key driver for this improved production rate will be the flow on benefits from the extensive overburden removal program during the last quarter," FMG said.

Overburden is the ground cover above an ore deposit.

The company said the volume of ore processed during the December quarter was 6.112 Mt, down from 6.682 Mt for the previous quarter.

The company said the main reasons for the reduction included plant works during November as part of further commissioning and general maintenance, and the processing of higher moisture ore because of of more mining below the water table.

A reduction in demand for lump ore after the commodities market meltdown in October forced the company to reduce all material to `fines' specification, requiring extra crushing, also a factor in the drop.

The forecast volume of processed material for the second half was 18 Mt, which would provide a full financial year result of about 31 Mt.

Fortescue said the discrepancy between the volume of mined ore and processed ore was due to a loss of material through the plant while ultra-fines are washed to reduce alumina levels.

It was also due to a build-up of stockpiled material at the mine site, which is part of a plan to reduce moisture within the feedstock for the ore processing facility.

Fortescue exported 15 Mt of iron one between May 15, when the mine started production, and January 8.

It said mid-November it would produce 19.8 Mt during calendar 2008, down from previous estimates of 22 Mt.

Shares in the company were up four cents, or 2.31 per cent, at $1.77.