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Fortescue still holding back on Iron Bridge project

Australian iron ore producer Fortescue Metals Group Ltd. still has no plans to bring its Iron Bridge project in Western Australia into production anytime soon.

"We're very confident in that project longer term," CEO Neville Power said during a Jan. 31 conference call. "Right now we just don't see that the conditions support bringing that into the market, but we're continuing to assess that."

The Iron Bridge project is a joint venture with China's Baoshan Iron & Steel Co. Ltd. and Taiwan's Formosa Plastics Group.

Power said Fortescue is continuing work on some of the technical aspects of the processing plant and is continually reviewing the commercial justification for the development.

Stage one of the project involved the construction of a 1.5 million-tonne-per-annum processing plant, which was completed in March 2015.

Stage two, meanwhile, remains subject to the successful testing of the processing plant and approval by the joint venture partners.

While the iron ore price has climbed back above the US$80-per-tonne mark, Power said the case for bringing Iron Bridge into production is not based on the current spot price.

"It's not so much about today's iron ore price as what forecast the iron ore price will be going forward, and more specifically what we forecast the price for iron ore concentrates that Iron Bridge would produce going forward," he said.

According to Power, the iron ore market remains in relative supply/demand balance.

The Chinese government is cracking down on illegal electric furnace operations, with the supply-side reform expected to remove 40 million tonnes to 50 million tonnes of iron ore from the market.

However, the opportunity for seaborne iron ore supply to fill that gap is likely to be limited.

"I think the market has got the ability to take that in its stride," Power said. "So while it's a help, it's not a big enough increase to warrant any significant change in supply/demand."

Fortescue is continuing discussions with Baosteel and Formosa regarding the development of Iron Bridge.

Although the other partners have the option to forge ahead with the project without Fortescue's help, Power said that is not something Baosteel and Formosa are considering.

"We see it as a joint venture decision first and foremost and all of the partners see it that way," he said. "We're all completely aligned."