Iron Ore Price, page-2447

Fortescue Metals Group's annual Pilbara site tour will be held next week on October 27-29. Historically, FMG has used these trips to highlight the progress of capital development, production ramp ups and infrastructure performance, notes Macquarie. "This year we are expecting the spotlight to be on the upgraded processing plants at Cloudbreak and Christmas Creek and the sustainability of the reduced strip ratios, which we outlined in our detailed review in August. We expect cash costs will continue to fall: Buoyed by a forecast weaker Australian dollar, continued low oil prices, more efficient processing plants and further operational enhancements we expect FMG's C1 costs will fall below $US14/wmt in the 2HFY16, below guidance of a $US15/wmt run-rate. We make a 1 per cent cut to our FY16 estimate post the 1QFY16 production result, however our $2.80 price target remains unchanged." Macquarie has an "outperform" on the stock. "FMG is generating strong cash flow at current iron ore prices and with further debt repurchases possible, the company is well positioned to end the year with a lower net debt position than anticipated. The site tour presents an opportunity for FMG to outline how it has reduced costs and strip ratios and why it is sustainable for at least five years."