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SYDNEY, Oct 16: Fortescue Metals Group, the world’s fourth-biggest iron ore miner, plans to boost production in the current fiscal year as the Australian miner counts on resurgent demand from leading buyer China and a sustained recovery in prices.
The world’s fourth-biggest iron ore miner said it expects first-half fiscal 2013 production at 36 million tonnes, setting the course for output of 82-84 million tonnes in the year to June 30. Last year it produced around 60 million tonnes.
The pace of production is being watched for signs on how weaker consumption of steel in China is playing out on demand for commodities such as iron ore and coal. Miners have in recent months been scaling back expansions and spending, raising concerns a decade-long mining boom in Australia is ending.
Fortescue said in a statement it expected benchmark iron ore prices ‘will stabilise in the short term at approximately $120 a tonne as the Chinese government prepares for its leadership transition in November and stimulus packages generate increased demand for steel and restocking at Chinese steel mills.’
Fortescue shipped just under 16 million tonnes of ore in the September quarter, the company said.
Fortescue’s bigger rival, Rio Tinto , is due to release its production data later on Tuesday. The world’s No.2 iron ore miner is expected to stick to plans to raise production in Australia.
Fortescue in September slammed the brakes on plans to lift its capacity to 155 million tonnes as a slide in world iron ore prices to under $87 a tonne coincided with a mounting debt pile.
Iron ore has since recovered to around $115 a tonne < .IO62-CNI=SI> and Fortescue has completed a $5 billion deal to restructure and increase its debt and lending facilities to more than $12 billion.
Production costs in the last quarter averaged $49.44 per tonne against average sales of $98 per tonne, the company noted.
September-quarter mine output was up 16 percent from the corresponding period a year ago, but 4 percent below the July quarter.
Iron ore has been among the hardest hit industrial commodities following China’s economic cool down. Despite efforts to broaden its customer base, Fortescue ore is mostly sold to steel mills in China.
Rio Tinto Chief Executive Tom Albanese recently told an investment seminar the company’s operations were performing better than those of peers, leading analysts to expect it was sticking to 2012 production guidance of 250 million tonnes. Last year Rio Tinto mined 244.6 million tonnes.
BHP Billiton, the world’s third-biggest iron ore miner, releases its quarter production data on Wednesday.
Shares in Fortescue held gains after its production report, trading up 2.2 percent at A$3.80. The stock tumbled as low as A$2.81 last month on concerns it would need to sell equity or prime assets as the iron ore price fell. (agencies)
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