Fortescue CEO Nev Power
Photo by: Bloombeg
PERTH (miningweekly.com) – Iron-ore major Fortescue Metals has reported an 88% fall in net profits for the financial year ended June, as lower iron-ore prices ate into profit margins.
Net profit after tax for the year reached $316-million, compared with the $2.7-billion reported in 2014, while underlying earnings before interest, taxes, depreciation and amortisation were down to $2.5-billion, from the $5.6-billion reported in the 2014 financial year.
Revenue for the full year decreased from $11.7-billion to $8.5-billion, on the back of a consistent 165-million-tonne-a-year production.
However, Fortescue on Monday reported that its C1 operating costs declined by 21% to average $27/t for the year under review, with the miner achieving a C1 cost of $19/t during the month of June.
CEO Nev Power said the results reflected the ongoing improvement in productivity and efficiency with strong outcomes across the company’s three key focus areas of safety, production and costs.
“In a challenging environment of lower iron-ore prices, this focus on efficiency and productivity from our world-class assets will continue to see operational improvements and cost reductions while we maintain production at 165-million tonnes a year to create long-term value for Fortescue shareholders.”
Power pointed out that sustainable cost reductions had been achieved through the development of the low-cost Solomon Hub, Fortescue’s product blending strategy, investments in enhanced processing capacity that allowed Fortescue to upgrade lower-grade ores to a higher product grade and improved orebody modelling.
Total delivered costs decreased by 27%, to $38/t, and included royalty charges, administration costs and shipping.
Meanwhile, Fortescue also cut back on its capital expenditure (capex) during the year, spending $626-million, compared with the $1.9-billion spent in 2014. The capex included $308-million in sustaining capital and a further $318-million spend on the construction of a fifth berth, rail, exploration expenditure and ship construction payments.
Looking ahead, Fortescue was hoping to lower its C1 cash costs to around $18/t for the 2016 financial year, based on an average exchange rate of 0.77, while capex would be maintained at an average of $2/t, excluding exploration and shipbuilding expenditure.