Fortescue confident iron ore price will stay close to $US120 per tonne
FORTESCUE Metals Group chief executive Nev Power has predicted an average iron ore price for the rest of the financial year of around $US120 a tonne, which he expects will be underpinned by the strong economic growth agenda of China's newly-installed leadership.
The forecast came as Fortescue reported record iron ore output of 19.6 million tonnes in the December quarter, about 32 per cent higher than the same period in 2011.
Fortescue's record shipments came after its two major Pilbara rivals, Rio Tinto and BHP Billiton, both released strong production data this week, in a massive boost to shareholders as well as federal Treasury coffers that rely on revenue from Australia's most valuable export commodity.
Mr Power hailed the past three months as a “defining quarter in our company's history'' and said Fortescue was on track to expand its annual production run rate in the Pilbara to 155 million tonnes by the end of 2013, up from 100 million tonnes at the moment.
“It was a quarter of delivering on the targets we set for ourselves back in 2010,'' he said.
Iron ore has rallied strongly to trade between $US140 and $US150 in recent weeks.
However, Fortescue does not expect to pay the minerals resource tent tax this financial year as iron ore prices recover from hefty falls in 2012.
While iron ore prices have recovered from their lows of about $US90 a tonne last September, Fortescue said the average price for the 2013 financial year to date was just above $US100 a tonne.
"Even if we saw iron ore prices continue at these levels for the balance of the year we would not expect to pay any MRRT this year,'' chief financial officer Steven Pearce said.
Fortescue was forced to sack 1000 staff and begin selling assets after the iron ore price fell to $US86 a tonne last September. The company also cancelled plans to boost its Pilbara annual production rate to 155 million tonnes but last month it reactivated work its Kings deposit in a bid to achieve the target.
Discussing the miner's production report today, Mr Power said continued Chinese demand, as well as seasonal restocking, had driven the recent iron ore price rebound. But he expected the price to remain around $US120 for the rest of the year, albeit with some volatility.
Mr Power said the Chinese Communist Party's growth agenda of doubling GDP between 2010 and 2020 would provide an underlying economic growth rate of 8 per cent a year.
Steel production would remain at high levels, driven by strong infrastructure spending as the country's high rate of urbanisation continued, he said.
Fortescue reported that its cash costs in the December quarter rose slightly to $US50.48, blaming the increase on its higher production rate and the strong Australian dollar. The Perth-based company said it expected its cash costs would range between $US45 and $US50 per tonne for the rest of 2012-13.
Fortescue’s average selling price in the December quarter was $US111, up from $US98 in the previous three months.
The miner’s shares closed down 2c at $4.63.
Additional reporting: AAP
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