Fortescue Metals Group has maintained its full year production target despite a weather-related dip in the third quarter and remains optimistic about its ambitious plans for a sixfold increase in iron ore output in the longer term.
Australia’s third-largest iron ore miner on Wednesday booked a record net profit for the six months to December 31 of $US800.8 million ($A752.07 million), up from $US314.1 million ($A294.98 million) in the previous corresponding period.
The iron ore miner’s full year production guidance remains unchanged at 55 million tonnes (Mt) despite marginally reducing its March quarter output forecast due to the effect of last month’s Cyclone Heidi on its operations in Western Australia’s Pilbara region.
Fortescue says it is still on track to almost triple output to 155Mt per annum by the end of June next year and has renewed optimism it will push ahead with its long-term expansion to 355Mtpa after defining substantial iron ore reserves at its Nyidinghu deposit in WA.
“It opens up further options for us and potentially brings expanded production on stream earlier,” chief executive Nev Power told reporters.
Fortescue looks likely to exercise an option to mine Iron Ore Holdings’ Iron Valley project, near Nyidinghu.
“It makes sense to look at that as a combined operation,” Mr Power said.
However, he declined to comment on speculation that Canada’s Teck Resources or the merged Xstrata/Glencore may be the mystery buyer of a 2.9 per cent stake in Fortescue recently.
“That’s not something that we’d choose to comment on,” Mr Power told reporters.
“Whatever their intentions are and so on, I guess they’ll disclose them when they need to, or when they wish to, in the market.”
Hong Kong commodities trader Noble Group has firmly denied speculation that it was the buyer.
Shares in Fortescue were down eight cents, or 1.43 per cent, at $5.53.
Options Xpress market analyst Ben Le Brun attributed the share price fall to profit taking after two straights days of gains that had been driven by takeover speculation surrounding the mystery buyer.
Mr Le Brun said Fortescue’s result exceeded market expectations by a few million dollars, although lower iron ore prices and higher costs had weighed on the result.
However, another analyst, Morningstar, said the net profit was weaker than the $US983 million ($A923.18 million) it had expected.
Fortescue said it had endured several months of iron ore price volatility as global commodity markets responded to challenging economic conditions in Europe.
Spot prices had rebounded after a low of about $US116 per tonne in late October, compared with record highs near $US200/t early last year.
Fortescue achieved an average realised sales price of $US139/t during the first half, on par with the corresponding period in 2010/11.
Mr Power said the iron ore price would remain around $US140/t in the short to medium term.
“Long term, China’s growth is forecast to be stable around the nine per cent mark and we don’t see significant new supply to come into the market in the short term.
“Therefore, we expect the price to remain in that range.
“Beyond that … we would expect to see additional supply coming into the market.”
Fortescue declared a dividend of four cents per share, fully franked, up from three cents per share, unfranked, for the previous corresponding period.
