Fortescue chief says company mining above its capacity rate
* Sees rising Chinese market as higher cost domestic mines shut
* With major expansion work over, focus is on debts, costs
By James Regan
KALGOORLIE, Australia, Aug 5 (Reuters) – World no. 4 iron ore miner Fortescue Metals Group Ltd said on Tuesday it will maintain production above its target rates and expects more Chinese competitors to close, further opening the China market to imports.
Fortescue is among a small number of mega miners flooding the sea-traded market with cheaply produced iron ore in a bid to knock out competitors.
Mining giants Rio Tinto , BHP Billiton and Brazil’s Vale are employing similar tactics, as they look to take a greater share of China’s 1 billion-tonne-per-year market for iron ore.
Fortescue is in the process of paying back more than $10 billion borrowed to dig mines and build port facilities in Australia to ship a targeted 155 million tonnes of the steel-making ingredient to China annually.
“We are now at a run rate somewhere north of 155 million tonnes per year,” Fortescue Managing Director Nev Power told Reuters at the Diggers and Dealers Mining conference. Fortescue has said it operated at an annualised run rate of 160 million tonnes in the month of June. [ID:nL4N0PM07J]
After repaying $3.1 billion in fiscal 2014, the company holds $7.2 billion in net debt, which Power said Fortescue intends to repay at an accelerated rate.
Plentiful supply has weighed on ore prices, which are currently at about $95.40 a tonne <.IO62-CNI=SI>, capped below $100 for more than two months.
But it has also led cutbacks by China’s higher-cost domestic iron ore producers. Sector analyst Wood Mackenzie estimates up to 50 million tonnes of Chinese mine output has been earmarked for closure and the figure could rise to 80 million tonnes.[ID:nL4N0OX0L4]
Power said the balance of supply was also shifting.
“In China, we are seeing a major movement by steel mills away from the iron ore mining areas to coastal seaports,” he said.
“There’s a recognition that it’s more efficient to ship finished steel overland than it is to ship bulk commodities such as iron ore and coal, and that favours importers.”