Fortescue Metals Group hopes to restart its Kings project in December amid expectations the iron ore price will stabilise around $US120 per tonne.
Australia’s third biggest iron ore miner said it remained committed to completing its Kings mine at its Solomon hub in the Pilbara and expanding production to 155 million tonnes per annum as stimulus in China generates increased demand for steel.
Chief executive Nev Power said the company would make a decision on restarting Kings by the end of the year.
"It is a sensible time to restart or make a decision to restart in December,” Mr Power told analysts today.
"That will allow continuity of the construction activities to flow from Firetail straight across to Kings."
In this case the company would not have to expand its current workforce in the region.
"We’ll continue to monitor the market conditions in China and if the iron ore price stays around where it is today then we’d be very confident about kicking that off,” Mr Power said.
With deferral of completion of the Kings deposit, Fortescue said its full year production target is maintained between 82 million tonnes and 84 million tonnes.
The company recorded an annualised shipping rate of more than 64 million tonnes during the quarter, ahead of guidance, despite disruption from maintenance and expansion activities.
The news pushed the company’s share price 13 cents, or 3 per cent, higher to $3.8t at the close of trade.
Fortescue said it expects the 62 per cent iron index price will stabilise in the short term at around $US120 per tonne as “the Chinese government prepares for its leadership transition in November and stimulus packages generate increased demand for steel and re-stocking at Chinese steel mills".
While the market remained volatile due to the oversupply of steel and low steel prices, most industry analysts expect the iron ore price to stabilise at approximately $US120 per tonne based on the global cost curve and the supply demand balance, Fortescue said.The company said cost guidance for fiscal 2013 remained at $US45 to $US50 per wet tonne.
Fortescue recently shelved $US1.6 billion ($1.57 billion) of spending and cut about 1000 jobs, downgrading expansion plans from a current 55 million tonnes to only 115 tonnes, instead of 155 million tonnes.
It also completed the distribution process for a $US5 billion ($4.90 billion) senior secured credit facility.
The company said it had responded to market volatility and uncertainty over iron ore prices with cost savings of more than $US300 million ($293.92 million) for full year 2013.
"Approximately $US200 million of these savings are expected to be sustained into the future,” the company’s September quarter report said.
Mining and processing activities continued to perform in line with expectations at both Cloudbreak and Christmas Creek and the Chichester operations would expand to 95 million tonnes per annum by the end of the December 2012 quarter.Fortescue expects total spending to be $US9.0 billion ($8.82 billion), with the Kings expansion likely to be completed before the end of calendar 2013.
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