Nov 30 2017 at 8:09 PM Updated 24 mins ago Fortescue's new CEO...

• Nov 30 2017 at 8:09 PM
• Updated 24 mins ago

Fortescue's new CEO promises greater efficiency
Fortescue's new chief executive Elizabeth Gaines (right) with deputy CEO Julie Shuttleworth. Photography Project

by Elizabeth Gaines takes the chief executive role at Fortescue Metals Group at a tricky time in its history.
Under her predecessor, Nev Power, FMG smashed industry benchmarks for cost efficiency. It became a centre of excellence in the complex world of mining logistics.
Power made the company the industry leader in terms of shipping ore by rail and sea. It will soon do the same in trucks.
Gaines says she will take FMG's costs to a new record low.
But her bigger challenge is the company's response to
. Over the past year the discount for FMG's lower grade ore has widened considerably forcing analysts to downgrade future earnings.
Earnings per share at FMG will decline in 2018 and 2019 and then plateau over the next three years, according to consensus earnings forecasts published by S&P Capital IQ.
Fortescue's chairman Andrew Forrest responds vigorously to any suggestion analysts' forecasts will be accurate.
He says he keeps a note on his office wall from an analyst who predicted mining of the company's Solomon iron ore deposit would not start until 2018. In fact, it started operations in 2011.
Nevertheless, the company is clearly responding to market concerns about the discount.
On Thursday Forrest said the company would upgrade its production so that the majority was more than 60 per cent Fe grade ore. This would allow it to compete "head to head in the higher grade markets".
Gaines says it is the pinnacle of her career to be chosen as CEO of FMG which has reshaped its entire top management team following Power's departure.
The company has a new chief financial officer, Ian Wells, a new deputy CEO, Julie Shuttleworth and a new chief operating officer, Greg Lilleyman.
Lilleyman, who was tipped to replace Power, was described by Forrest as one of the many "rock stars" considered for the top job.
Gaines should have a successful tenure as CEO of FMG provided the Chinese economy continues to grow at its current levels of around 6 to 6.5 per cent. FMG, which is generating about $1 billion in cash every half year, has a shareholder friendly 50 to 80 per cent payout ratio
Forrest has immense confidence in the Chinese economy under the leadership of president Xi Jinping. Forrest, who is close to Xi, says he will catch up with the president at the Boao Forum for Asia in April next year.
Disclosure: The author's self managed super fund owns shares in FMG.