FMG takes axe to costs
Fortescue Metals Group yesterday embarked on the most drastic cost-cutting exercise since its near-death experience two years ago, slashing its capital expenditure target for this year by $US650 million ($765 million) in a move likely to trigger a wave of job cuts.
Fortescue also said it would try to sell some of the four so-called very large ore carriers (VLOC) worth $US275 million ordered from a Chinese shipyard in June. The VLOCs are a step up from the traditional cape-size vessels that ferry the miner's ore from Port Hedland to China. Although most of the payment for the VLOCs is not due until delivery in the second half of 2016, Fortescue said yesterday it would "investigate alternative ownership and funding opportunities".
The drastic actions, in response to an iron ore price anchored at 5½-year lows, are a mirror of Fortescue's push in 2012 to slash its cost base and sell non-core assets as well as a stake in its Pilbara rail and port infrastructure. The infrastructure deal did not eventuate and the iron ore price recovered.
Fortescue yesterday did not mention a sale of part of its infrastructure. It said some of the cuts to this year's capital expenditure target - which stood at $US1.3 billion - would come from the under-budget completion of work on Anderson Point's fifth berth.
It would not comment on how many jobs would be cut from axing a five million tonne-a-year detrital ore processing plant for Solomon, a cutback in exploration work and reduction to other non-specified operating activities.
