Hello I’m Lelde Smits for the Finance News Network and joining me from Fortescue Metals Group Limited (ASX:FMG) Chief Financial Officer Stephen Pearce. Stephen welcome to FNN. Lelde Smits: What is Fortescue Metals Group’s strategy for extracting value and where are your operations located?
Stephen Pearce: In terms of strategy, Fortescue Metals Group Limited
(ASX:FMG) has rapidly become one of the major iron ore producers of the world. We’re now the fourth largest producer globally. Our operations are located up in the Pilbara, so our integrated mine, rail and port facilities are in the best iron ore province in the world, located close to the major steel producing countries of Asia.
Lelde Smits: What are Fortescue Metals Group’sproduction targets and your focus for the operations?
Stephen Pearce: Fortescue’s just recently completed a major growth phase as a company. We’ve spent approximately $US10 billion, expanding our production by 100 million tonnes per annum. We’ve now successfully ramped up to 165 million tonnes per annum, which is in excess of our initial targets. And now the focus is really around maximising value from those operations.
Lelde Smits: How has Fortescue Metals Groupresponded to a declining iron ore price environment?
Stephen Pearce: As one of the top four producers in the world; our position on the global cost curve is absolutely a vital as a company. We’ve been very successful, as we’ve ramped up the production. We’ve invested in new technology, new operations and that’s successfully brought our costs down significantly, over the last couple of years. In total, our costs have come down approximately 60 per cent over the last two years.
And in terms of our guidance for FY16 our C1 cost at $18 per tonne, which will mean our delivered cost to China, will be approximately $US25 per tonne. Some of those initiatives really are about us maturing as a company. It’s about operational efficiencies; it’s about labour costs, investing in new technology for automated fleet. So it’s right across our operations, we’re really seeing those benefits flow through.
Lelde Smits: What is Fortescue Metals Group’soutlook for the iron ore price over the medium term?
In terms of outlook for the iron ore price, it would be a very brave man who would provide a formal prediction. But what we do believe in is the continuing journey of China. They have a long way to go in terms of building out infrastructure, and then that will also expand across the broader Asian region. So we fundamentally believe in that continued journey of infrastructure build out, developing economies and that all needs to be supported by iron ore.
Lelde Smits: What areFortescue Metals Group’smain priorities in the near term?
Stephen Pearce: In terms of priorities for Fortescue, it’s really about controlling the things we can control. So it’s about safety, production and costs. Fortescue’s been really unique in terms of the pace that it’s built out its operations, and a lot of the success has really been driven by the people and the culture, within the organisation.
So that’s something that we’ll really look to build on. I think it’s something we can continue to capitalise opportunities in and around our existing business. But I think they’re also skills that we can take to other businesses across Australia and ultimately, across the world.
Lelde Smits: Stephen Pearce, thank you for the update from Fortescue Metals Group.
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