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Fortescue finds more ways to slash costs in Q3'16

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Fortescue finds more ways to slash costs in Q3'16

Fortescue MetalsGroup Ltd. is proving it still has more costs to pull out of its operationswith a 6% quarter-over-quarter and 43% year-over-year reduction in its C1 cash costto US$14.79 per wet tonne in the third quarter of the 2016 financial year.

By comparison, costs in the previous quarter amounted to US$15.80per wet tonne and in the third quarter of the 2015 financial year totaled US$25.90per wet tonne.

Meanwhile, shipments during the third quarter rose 4% to 42.0million tonnes compared to a year earlier, but remained in line with the prior quarter.

CEO Neville Power said the drop in costs is the ninth consecutivequarterly reduction, with productivity and efficiency gains offsetting increasesin the Australian dollar and fuel prices.

Fortescue's cash balance continued to grow to US$2.5 billionby the end of March, with the company attributing the increase to strong operatingcash flows as a result of its sustained focus on productivity and efficiency improvements.

Shipments are currently running ahead of target due to the unseasonalmild weather experienced during the March quarter.

Fortescue said potential upside to the full-year guidance remainssubject to the impact of weather during the June quarter.

The Australian iron ore producer is maintaining its goal of exitingthe 2016 financial year at a US$13-per-wet-tonne cost of production, but noted thatthis could be difficult to achieve given the recent increase in the Australian dollarexchange rate and higher oil prices.

Fortescue has also maintained its full-year C1 cost guidanceat US$15 per wet tonne and CapEx guidance at US$200 million.