FMG Expansion

FMG overcomes low grade I/O problem. So lets not hear complains from FMS bod about I/O greade.
GLTA


  FMG's $US1.27b Eliwana mine drives 'premium' iron ore push
Fortescue chief executive Elizabeth Gaines says Fortescue will introduce a new premium iron ore product in fiscal 2019. Trevor Collens

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by Peter Ker
Fortescue Metals Group will be selling higher grade iron ore products within 12 months after approving construction of the $US1.27 billion ($1.68 billion) mine that could offset pressure on earnings from discounts applied to its lower grade ore.
in response to China's growing demand for high grade raw materials, and chief executive Elizabeth Gaines revealed on Monday that Fortescue would take a new "premium" product to market before July 2019.
"It is a new product that will add to our existing product suite, but it is a product with a 60 per cent iron grade," she said.
Fortescue currently sells several products with iron grades between 56 per cent and 59 per cent, and Ms Gaines said the new "premium" product could not be sustainably offered to customers without construction of a new mine at Eliwana in Western Australia's Pilbara region.
Eliwana's development was approved by the Fortescue board on Monday, with spending on the projectset to begin in fiscal 2019 and first ore to come by 2020.

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"This will be a product that accesses the ore from Eliwana, but will be blending with existing operations from Solomon and the Chichesters as well, so we will look to introduce this product in the second half of our next financial year," said Ms Gaines.
"That will be relatively small volumes and it wouldn't be sustainable for us to introduce this product if we didn't have Eliwana coming on stream in 2020, so we are starting to introduce the product, we will work with our customers proactively."
The fresh detail on Fortescue's grade strategy was welcomed by investors on Monday, but RBC analyst Paul Hissey said more detail was required particularly over the Eliwana development's impact on operating costs.
While some fear that conjuring higher grades will force Fortescue to reduce export volumes or increase unit costs, Ms Gaines said Fortescue would continue to export a "minimum" of 170 million tonnes per year and would maximise margins.
"We are funding this from our operating cashflow, we are in very strong shape from a balance sheet perspective and we are all excited about this project," she said.
The fact the new premium product will be sold in addition to Fortescue's existing products suggests the company has some way to go to deliver on chairman Andrew Forrest's vow that a majority of the company's product would have iron grades of 60 per cent or above.
"In the future a majority of Fortescue's production will be [more than] 60 per cent [iron] competing head to head in the higher grade markets," he said on November 30, 2017.
JP Morgan analyst Lyndon Fagan said he expected Mr Forrest's goal would not be delivered.
"Previously FMG was targeting a 'majority' of its shipments to be over 60 per cent iron, however, we now believe it will be below this given the challenges in maintaining acceptable specifications on the lower grade product offering," he said.
Approval for Eliwana is the first in what looms as spent on new mines over the next three or four years.
But unlike the mines built during the mining boom,.
The iron ore mine within months, while Rio Tinto may also approve development of the new before the end of 2018.
Shaw and Partners analyst Peter O'Connor said simultaneous development of the three mines would add to the inflationary pressures that have been witnessed in the mining industry in recent times.
"The deflationary trend has run its course and more typically now we hear about cost pressures," he said.
"If you then add to that a pressure point of a substantial amount of capital spend in a finite area, it will put more pressure on that. There is a finite pool of people and a finite pool of equipment to do this stuff, and it is going to be like building three Roy Hills at the same time."
The timing of the Eliwana development decision should enable Fortescue to be signing construction contracts before BHP and Rio, but Ms Gaines said there had been no deliberate strategy to beat those two rivals to a development decision.
"It is less about what is happening with others in the sector, but more around our own pathway, [but] it can't hurt to be the first," she said.