FMG takes on crush control
Fortescue Metals Group has bought out the finance leases on the ore processing facilities at its Christmas Creek mine, giving it full control of the operation.
Fortescue took over supervision and management of the ore facilities - run by Mineral Resources subsidiary Crushing Services International - in September, five weeks after the death of a 26-year-old electrician at the mine, citing the need to ensure their "sage and hazard-free operation.
Safety management on Fortescue sites again came under fire just a few weeks ago after a second death at Christmas Creek in four months.
The Department of Mines and Petroleum took the rare step of ordering the company to increase supervision and safety checks across its entire Pilbara operations, particularly relating to the isolation of plant and equipment before maintenance.
Fortescue announced after yesterday market close that it had bought out the finance leases for the processing facilities and assumed "full ownership and operational responsibility".
The financial terms of the buy-out where not revealed, but Fortescue's last annual report said it had $US662 million of assets under finance leases at June 2013, including the ore processing facilities and the Solomon power plant, sold to Canada's TransAlta for $US318 million in September 2012.
After allowing for repayments over the past six months, it is believed the total cost to buy out the finance leases would have come to between $200 million and $300 million.
When announcing the contract to build the second ore processing facility in 2011, Mineral Resources said it expected about $1 billion in revenue from the deal over 10 years.
But while analysts had previously said the processing facilities added about $4/t to the costs of production at Christmas Creek, it is believed the decision to buy out the leases is unlikely to lead to material cost savings.
Fortescue said it had moved 121 former employees of CSI onto its books since exercising its step-in powers and had worked closely with the company to ensure the "safe and efficient" operation of the facilities.
In a statement yesterday, Fortescue chief executive Nev Power said the buy-out would also contribute to Fortescue's ongoing debt-reduction program.
Earlier, Fortescue shares closed down 6¢ at $5.14.
Mineral Resources closed down 16¢ at $11.37.
