Bad weather has forced Fortescue Metals Group to lower its full-year production forecast but the company remains upbeat about demand for its iron ore from China.
Fortescue on Thursday said it expected to ship 127 million tonnes of iron ore during the 2013/14 financial year, which is at the bottom of its previous range.
That’s despite shipping a record 28 million tonnes during the December quarter, which was up more than 43 per cent compared to a year ago.
And Fortescue says it remains on track to achieve a sustainable production rate of 155 million tonnes per year by the end of the March quarter.
Chief executive Nev Power said heavy rainfall during January had impacted on production.
“We have experienced some significant delays with a very wet January,” he said.
Fortescue’s shares fell more than five per cent immediately following the release of the report, but recovered some of those losses to close at $5.23, down seven cents.
Mr Power also remained upbeat about steel production and iron ore demand in China, its biggest customer, and dismissed analysts’ suggestions the iron ore price could fall below $100 a tonne.
“There no reason to say the iron ore price is going to do anything but be relatively stable and predictable,” he said.
“There will always be short term fluctuations but I think for the next year or two we could expect to see it in that $110 to $130 a tonne trading range.”
Fortescue received an average price of $US125 a tonne for its iron ore during the three months to December.
Meanwhile, Mr Power hailed the company’s strategy of taking on high amounts of debt to fund its expansion a success after the company paid back more than $3.1 billion since November, mostly through early repayments.
The company has gone from almost nothing to be the world’s fourth largest iron ore miner in the space of a decade, which saw its debt pile peak at around $12.7 billion last year.
“The strategy of using debt as the fastest and lowest cost way to fund out expansion has been very successful,” he said.
“We have now commenced that repayment process and will be able to reduce debt quickly over the next few years.”
Mr Power said the early repayments, combined with the repricing of a $5 billion debt facility would save the company more than $300 million in interest repayments a year.
