Update on November 15 after it is
published on November 09: add preface.
SteelHome is impressed by FMG during
Media Tour on Nov.2-3. Fortescue only uses eight years to become the fourth
largest iron ore miner in the world. It adheres to safety, productivity and
efficiency and ongoing improvements so it can reach established target at the
fastest pace. Cost-cutting, debt repayment, close interaction with China, and
strategic delivery are the hot topics during the time.
SteelHome is invited to join FMG
Media Tour 2016 during November 02-03.
On November 02, in corporate head
office, CEO Neville Power, Director of Operations Nick
Cernotta, GM of Christmas Creek Project Tony Swiericzuk, Director of Sales and
Marketing David Liu, and Group Manager Finance & Investor Relations Stuart Gale
made respective introduction of company strategy, mining efficiency and
automation, interaction with Chinese market and strong financial performance.
Medias later visited Operation Centre in the office which makes accurate
real-time monitoring of mining, loading, railway shipment, blending and portal
activities that are 2,000 miles away in Pilbara and at Port Hedland. In the
afternoon, medias visited Christmas Creek and processing plant in Pilbara.
On November 03, medias visited
FMG’s exclusive railway lines and loading facilities at Port Hedland. GM Port
Mr. Fernando Pereira and GM Rail Mrs. Ron Dagostino gave detailed introduction
in the field.
During the visit, delegates had
Interactive communication with FMG and learnt more about the company.
The following is a special account of hot points during the visit.
1. FMG Aims to be Lowest-Cost
Miner
Productivity and efficiency are
the words repeated in introductions by the management. Over the last 11
quarters, FMG’s C1 cost has been falling continuously from US$48/wmt in FY2012
to US$13.55/wmt in Q3 2016 and is expected to fall to US$12-13/wmt in FY17.
Apart from contributions from AUD/USD exchange rate and lower oil prices,
a
close eye on productivity
and efficiency is what makes cost reduction sustainable. Major steps to cut
costs include:
-
Innovation and Technology Strategy
& Mining Automation. Solomon hub has already
adopted autonomous haulage and drilling. AHS (Autonomous Haul System) trucks
are 20 percent more productive than regular fleet of trucks of the same type
and have so far moved 240 million tons of iron ore. Cloudbreak uses
dewatering telemetry. Christmas Creek is equipped with OPF optimization and
Integrated Operations Center. The adoption of the above mentioned
technologies has saved about 3.5 billion dollars of operation costs and is
expected to further cut expenditures when they become more sophisticated and
expand into each others.
-
Lower Strip Ratios. FMG reduces cut-off
grades through blending and beneficiation, widens new pit limits and
increases utilization of resource value. The average strip ratio was 1.1 in
Q3 2016 and is expected to rise to 1.4 in FY17-21, with cost only increasing
~US$1/WMT on current assumptions. FMG’s blending strategy is 58% fe iron ore
product. The iron percentage is not very high but can fully meet feed
requirements. In the interest of metallurgical requirements and mineral features, FMG
positions itself as a high-value-in-use product supplier.
-
Portal Loading/Unloading
Speed. FMG current has 3 reclaimers, 3
shiploaders and 5 berths load vessels at a combined rate of 36,000 tons per
hour. The configuration makes Herb Elliot Port Australia’s most efficient
bulk port, as shiploaders can continue work if fully-loaded vessels
fail to leave the port when the tide comes.
-
Railway Reshaping.
Fortescue is the first miner that uses 160 ton car trains. Each train
contains 250 ore cars, carries 36,000 tons of iron ore and can move faster
against the speed of 80km/hour. Each train is 3-km long and its cycle time
averages 22 hours. The railway network, connecting four mine sites, is 620
km long. The mine farthest from the port is 300 km.
-
VLOC.
8 VLOCs are being constructed at two Chinese shipyards. Each one of them has
261,000 deadweight tonne and can ship 21 million tons of iron ore a year, or
12% of the total volume. First vessel will be delivered to FMG at the end
of November.
2. Debt Cutting
In Q3 2016,
FMG’s net debt has been reduced to US$4.2 billion, with net gearing1 of 33
percent. With all-in breakeven price at US$28.3/t, FMG is very well positioned
in creating cash flow. FMG priorities cash for debt repayment and is flexible to
continue early repayments without any penalties. The first maturity in June 2019
has been downsized from 5 billion dollars to 2.976 billion dollars.
3. Sourcing from China
China, which is of
crucial importance to FMG, has more than 50 steel mill clients. From China, FMG purchases a large quantity of
products such as truck tyres, ore cars and components and rail track, and has so
far signed over $1 billion in Chinese contracts. Being the first to use certain
Chinese products, FMG actually creates a win-win situation, as other miners
follow in and become consumers of the same product.
4. Strategic Delivery
Fortescue’s strategic targets include: a) production
rate to be consistent at 165-170 million tons per year, b) C1 cost lower to
US$12-13/wmt, c) resource value to be maximized, d) free cash prioritized to
debt repayment, and d) ongoing improvements.
Fortescue has significant resources to be developed.
It currently holds 11.6 billion tons of hematite iron ore and 6.7 billion tons
of magnetite iron ore. To be specific, Western Hub (in the replacement of
Firetail mine) has 740 million tons of resources, Nyidinghu 2.46 billion tons,
Chichester 3.65 billion tons and Solomon has 4.76 billion tons.
Fortescue only uses eight years to become the fourth
largest iron ore miner in the world. It adheres to safety, productivity and
efficiency and ongoing improvements so it can reach established target at the fastest
pace.
Neville Power,CEO
FMG Culture and
Strategy |
Nick
Cernotta,
Director of Operations |
Tony
Swiericzuk,
GM of Christmas Creek |
David
Liu,
Director of Sales and Marketing |
Stuart
Gale,
Group Manager Finance & Investor Relations |
Christmas Creek
Integrated Operations Center |
Cloudbreak Mine
Control |
Railway Operation
Monitoring |
Christmas Creek |
Christmas Creek
Beneficiation Plant |
Ore Trains at Port |
Capesize Vessel at
berth |
Shiploading |
From left to right:
Neville Power,
CEO with FMG, Chen Yan, Iron Ore Analyst with SteelHome
Wen Hu, Editor with
SteelHome, and
David Liu,
Director of Sales and Marketing with FMG |
(To contact the reporter on this story: Jane.hu@steelhome.cn or 86-21-50585733) |