Fortescue has released its June 2019 quarterly production results, reporting record quarterly shipments of 46.6 million tonnes (mt) and cash production costs (C1) of US$12.78 per wet metric tonne (wmt).

QUARTERLY HIGHLIGHTS

1.      Safety TRIFR of 2.8, an improvement of 22 per cent compared to 31 March 2019 and a record annual result

2.      Record quarterly shipments of 46.6mt including 4.7mt of West Pilbara Fines

3.      FY19 shipments of 167.7mt, one per cent lower than FY18 due to the impact of Cyclone Veronica

4.      Average revenue received increased by 30 per cent to US$92 per dry metric tonne (dmt) compared to the March quarter of US$71/dmt

5.      C1 costs of US$12.78/wmt, five per cent lower than the March quarter (US$13.51/wmt)

6.      Payment of a fully franked A$0.60 per share dividend in June 2019, bringing total FY19 dividend payments to date to A$0.90 per share

7.      Official opening of the Judith Street Harbour in Port Hedland marking the completion of Fortescue’s towage infrastructure and fully integrated supply chain

8.      Approval of the US$287 million investment in the Queens Valley mining area development at the Solomon Hub

9.      Eliwana Mine and Rail and Iron Bridge Magnetite projects progressing on schedule and budget

Fortescue Chief Executive Officer, Elizabeth Gaines, said “The Fortescue team has achieved exceptional results across safety, production, costs and delivery of our product strategy in the June quarter. Most pleasingly we have seen our TRIFR reduce to its lowest annual level of 2.8, a 24 per cent reduction compared to the prior year reflecting our sustained focus on safety.”

“We have delivered record quarterly shipments of 46.6mt while reducing C1 costs by over five per cent to US$12.78/wmt reinforcing our position as the lowest cost producer. In addition, with healthy iron ore inventory levels across the supply chain we are well positioned to continue delivery of our highly valued product mix to customers in FY20.”

“Strong demand for our 60.1% iron content product West Pilbara Fines continues, and we remain focussed on our integrated operations and marketing strategy to optimise product mix to meet the needs of our customers.”

“Fortescue has recently established a new wholly owned sales entity in China to support our customers through direct supply from regional Chinese ports, providing customers with an option to purchase smaller volumes, in Renminbi. This entity will complement our existing contractual seaborne arrangements withsactions completed in June 2019.”

“The ongoing strength of our operational performance and cashflow generation resulted in the Board resolving to accelerate returns to shareholders through payment of a fully franked A$0.60 per share dividend on 14 June 2019. Fortescue has now paid A$0.90 per share in FY19 dividends to date and maintains its dividend payout policy of between 50 and 80 per cent of full year net profit after tax.”

“Fortescue’s growth and development projects at Eliwana and Iron Bridge remain on schedule and budget. In addition, our ongoing investment in autonomy, relocatable conveyors and other initiatives such as the Queens Valley development will continue to deliver enhanced returns to shareholders.”

OPERATIONS

The Total Recordable Injury Frequency Rate (TRIFR) reduced to 2.8 (3.6 at March 2019) on a rolling 12-month basis. This improved safety performance is also reflected in the quarterly TRIFR of 2.4.

During FY19 initiatives such as the company wide “Safety Stop” and “Take Control” have contributed to a record low annual safety result and a 24 per cent improvement in safety performance compared to the prior financial year.

Mining, processing, rail and shipping combined to achieve record monthly shipments of 17.3mt in June which contributed to record quarterly shipments of 46.6mt. Total FY19 shipments were 167.7mt.

Ore mined and overburden removed increased by 20 and 17 per cent respectively compared to the prior quarter. When combined with a 13 per cent increase in ore processing, this has increased iron ore inventories, supporting Fortescue’s integrated operations and marketing strategy and enhanced product mix into FY20.

The average strip ratio was 1.4, consistent with the prior quarter and averaged 1.5 for FY19.

Shipments of West Pilbara Fines were 4.7mt, representing 10 per cent of the total. FY19 shipments of West Pilbara Fines were 9.0mt in line with guidance.

C1 costs of US$12.78/wmt reflect disciplined cost management, mining and processing performance, together with record shipping levels achieved during the quarter. FY19 C1 costs were US$13.11/wmt, six per cent above FY18.

IRON ORE PROJECTS

The Eliwana Mine and Rail Project reached an important milestone in July with the official sod turning event and is progressing in line with expectations to achieve first ore on train on schedule and budget in December 2020.

To date, the Project has awarded contracts to the value of A$330 million to more than 250 Australian businesses, and the structural steel fabrication of the overland conveyor, stockyard, train loadout facility and rail bridge girders will occur in Western Australia.

The US$2.6 billion Iron Bridge Magnetite Project to produce 22mt of premium 67% iron grade concentrate product continues on schedule.

Detailed engineering has commenced and is progressing with early works, including construction of access roads, airport and camp underway. Bulk earthworks are expected to commence in the last quarter of 2019 and procurement of long lead items for the project is underway.

Contractual awards and project commitments are expected to reach US$1.0 billion by 30 June 2020.

FY20 GUIDANCE

1.      170-175mt in shipments, inclusive of 17-20mt of West Pilbara Fines product

2.      C1 costs expected to be in the range of US$13.25-13.75/wmt

3.      Average strip ratio 1.5

4.      Total capital expenditure of US$2.4 billion, allocated to the following categories:

a)      Sustaining capital US$700 million

b)      Operational development US$200 million

c)      Queens Valley development US$150 million

d)      Major Projects

1.      Eliwana US$700 million

2.      Iron Bridge US$500 million

e)      Exploration US$140 million

5.      Depreciation and amortisation of US$7.70/wmt

6.      A total dividend pay-out ratio between 50 and 80 per cent of full year NPAT

T1: PRODUCTION SUMMARY

Related Link: Official Document