I didn't write this, its what Americans are being told today;...

I didn't write this, its what Americans are being told today;

Update: Fortescue Metals Is Doing Much Better Than Its Guidance
Oct. 17, 2014 3:16 PM ET |

Disclosure: The author is long BIRNF, FSUMF. (More...)

Summary

• Fortescue Metals is still operating above its official guidance.
• This is a positive surprise and the company is reducing its net debt fast.
• The investment thesis doesn’t change, and the company’s production rate and cost per tonne confirm my expectations.

A positive surprise from Down Under as major iron ore miner Fortescue Metals has announced its production rate for the first quarter of financial year 2015 (which is the third quarter of calendar year 2014). The company was able to break its previous ore shipping record for the eighth time in a row as Fortescue was able to ship not less than 41.5 million tonnes of iron ore. This means the company's expanded port facilities are able to ship ore at an annualized rate of 166 million tonnes per year, which is 6% higher than the expected 155 million tonnes per year. As this is the second quarter in a row whereby the targeted shipping rate has been exceeded, I wouldn't be surprised if the company would be able to beat its production guidance as well.

During the quarter, the effective iron ore production was a bit less than expected at 38.9M tonnes of processed ore which is an annualized rate of just over 155 million tonnes per year. The cost per tonne dropped from $34/t to $32.08 per wet metric tonne. This might sound rather unimportant but you couldn't be farther from the truth. At a production rate of 155 million tonnes per year, every $1 decrease in the operating costs will have a huge impact on the revenue, bottom line and net debt reduction. And reducing the net debt still is one of the company's priorities this year.

The net debt position was $6.9B as of at the end of September (which is a reduction of $1.7B compared to the net debt position as of at the end of last year which means Fortescue is making considerable progress. At an estimated cost of debt of 5%, every $1B net debt reduction saves the company roughly $50M per year in interest expenses.

Fortescue is really performing well and will be one of the biggest winners should the iron ore price rise again (I'm aiming for a sustaining iron ore price of $90/t in the longer run as no new projects will go into production and several higher cost mines will have to shut down).

The total cost to deliver its ore to its customers (which includes production costs, payable royalties and shipping costs) was just $45 per wet metric tonne. As I'm expecting a received price of $65/wmt (taking the grade difference and moisture in the end-product into consideration), Fortescue will definitely survive this downturn and could actually be debt-free before the end of the financial year 2017. I already have BC Iron but will add Fortescue in the near future.

http://seekingalpha.com/article/257...-better-than-its-guidance?app=1&uprof=44&dr=1