Fortescue
has released its September 2019 quarterly production results, reporting
shipments of 42.2 million tonnes (mt) and cash production costs (C1) of
US$12.95 per wet metric tonne (wmt).
Quarterly highlights
1.
Safety TRIFR of 2.7, an improvement of four per cent
compared to 30 June 2019
2.
Shipments of 42.2mt, five per cent higher than Q1
FY19
3.
C1 costs of US$12.95/wmt, two per cent lower than Q1
FY19
4.
Average revenue received of US$85 per dry metric
tonne (dmt), 89 per cent higher than Q1 FY19 of US$45/dmt
5.
Repayment of US$200 million and re-financing of the
balance of the US$1.4 billion Term Loan on improved terms
6.
Net debt of US$0.5 billion at 30 September 2019,
compared to US$2.1 billion at 30 June 2019
7.
Sod turning ceremony for the Eliwana Mine and Rail
project on 5 July 2019
8.
Commencement of towage operations at the Port of
Port Hedland on 5 September 2019
9.
Renewal of the A$500 million share buy-back program
for a further 12 months to October 2020
Fortescue
Chief Executive Officer, Elizabeth Gaines, said “The Fortescue team has
delivered a strong performance across all aspects of the business in the
first quarter of FY20, building on our record results in FY19.
Importantly, our safety performance has maintained its positive trend with
a four per cent improvement in TRIFR to 2.7.
“Fortescue’s
outstanding operational performance across mining, processing, rail and
port delivered shipments of 42.2mt, a five per cent improvement on Q1
FY19, at a C1 cost of US$12.95/wmt. Through the quarter we maintained our
enhanced product mix with strong demand for our range of products,
including our 60.1% iron content West Pilbara Fines. This is reflected in
Fortescue’s contractual price realisation which averaged 89 per cent of
the benchmark 62% CFR Index price during the quarter.
“The
combination of operational performance and realised price has generated
exceptional operating cashflows and lowered net debt to US$0.5 billion at
30 September 2019. This has provided the capacity to further strengthen
the balance sheet through debt reduction and refinancing of the Term Loan
on improved terms.”
Operations
The
Total Recordable Injury Frequency Rate (TRIFR) reduced to 2.7 on a rolling
12-month basis (2.8 at June 2019).
Fortescue
remains focussed on improving safety performance through sustained risk
reduction activities and projects. Initiatives such as the “Take
Control” program are delivering improvements in safety culture and
performance across the business.
Mining,
processing, rail and shipping combined to achieve quarterly shipments of
42.2mt, five per cent above Q1 FY19 and nine per cent lower than the
record performance in the June quarter, reflecting seasonal maintenance
activity. Full year shipping guidance remains at 170-175mt.
During
the quarter a number of new mining areas were developed, resulting in an
increase in overburden removal, ensuring Fortescue is well positioned to
deliver on its product strategy. As a result, strip ratios were slightly
higher at 1.7 during the quarter and are expected to average 1.5 for FY20.
Ore
processing was five per cent higher than Q1 FY19, and the variance to the
June quarter reflects seasonal maintenance activity.
C1
costs of US$12.95/wmt reflect disciplined cost management, mining and
processing performance. Total Australian dollar cash costs were consistent
with the June quarter with C1 costs benefitting from the lower Australian
dollar and changes to the accounting treatment of leases.
Marketing
Crude
steel production in China reached 745 million tonnes[1] for the nine
months ended 30 September 2019, 8.4 per cent higher than the prior
comparable period, underpinning demand for seaborne iron ore. Iron ore
stocks at Chinese ports at the end of the quarter were 120 million tonnes,
five million tonnes higher than the prior quarter, representing
approximately 42 days of inventory. Iron ore demand is supported by
continuing high levels of steel production, decreased use of scrap and
mill restocking.
Demand
for Fortescue’s products in the quarter remained strong with Chinese
steel mills focussed on raw material costs in response to current steel
margins.
Fortescue’s
average revenue was US$85/dmt in the quarter. The average contractual
price realisation increased to 89 per cent of the average 62 CFR Index
price of US$102/dmt during the quarter. The closing Platts 62 CFR Index
price at 30 September was US$93/dmt (US$118/dmt at 30 June).
Iron ore projects
The
Eliwana Mine and Rail Project reached an important milestone in July with
the official sod turning ceremony and is progressing in line with
expectations to achieve first ore on train on schedule and budget in
December 2020.
The
US$2.6 billion Iron Bridge Magnetite Project is on schedule and budget to
produce premium 67% iron grade concentrate product in the first half of
2022.
Preliminary
site works have commenced including road upgrades, earthworks and village
construction, with key long lead procurement contracts placed.
FY20 guidance
•
170-175mt in shipments, inclusive of 17-20mt of West Pilbara Fines
product
•
C1 costs expected to be in the range of US$13.25 - 13.75/wmt
•
Average strip ratio 1.5
•
Total capital expenditure of US$2.4 billion
•
Depreciation and amortisation of US$7.70/wmt
•
Total dividend pay-out ratio between 50 and 80 per cent of full
year net profit after tax
T1: PRODUCTION SUMMARY
Million tonnes
|
Q1 FY20
|
Q4 FY19
|
Var %
|
Q1 FY19
|
Var %
|
|
|
Ore mined
|
50.6
|
57.6
|
-12%
|
51.9
|
-3%
|
|
Overburden removed
|
88
|
79
|
11%
|
85
|
4%
|
|
Ore processed
|
45.1
|
48.5
|
-7%
|
42.9
|
5%
|
|
Total ore shipped
|
42.2
|
46.6
|
-9%
|
40.2
|
5%
|
|
C1 (US$/wmt)
|
12.95
|
12.78
|
1%
|
13.19
|
-2%
|
|
Related Link: Official Document
|