Fortescue Metals expects its production costs to be lower than previously forecast, and is planning to use the savings to continue paying off its debt.
The iron ore miner on Thursday said it had improved shipments, reduced costs faster than planned, and trimmed its debt levels further in the December quarter.
In addition to lowering costs at its Pilbara operations, Fortescue benefited from cuts in capital expenditure, debt and a sharp fall in shipping costs, chief executive Nev Power said.
"That results in a substantial reduction in the cash breakeven from our last guidance of $US36 a tonne," he said on a conference call.
The miner said it achieved a cash cost of $US15 per wet metric tonne in December, six months ahead of its original target for the end of the financial year.
Costs averaged $US15.80 per wet metric tonne in the December quarter, down 45 per cent on a year earlier and 7.0 per cent on the previous quarter.
It will provide an updated cost guidance at the time of its half year results next month.
The world's fourth biggest iron ore exporter has been racing to cut costs as it grapples with the plunge in prices of iron ore, which have slid more than 75 per cent over the last four years.
Spot prices for the steelmaking ingredient were last at $US41.30 a tonne, but Fortescue's lower quality iron ore typically fetches between 85 and 90 per cent of that price.
The miner continues to make a good cash margin on every tonne of iron ore it is shipping, chief financial officer Stephen Pearce said, adding that he would look for any opportunity to use excess cash to pay off further debt.
Fortescue said it had repurchased corporate bonds worth $US750 million during the quarter, taking advantage of a slump in the price of its bonds to record lows to buy its debt back cheaply.
Its net debt stood at $US6.1 billion at the end of December, while it held $US2.3 billion of cash on hand.
"We expect this process of discounted repurchases to continue in the second half, with bonds trading at larger discounts to face value than during Dec quarter," Shaw and Partners' analyst Peter O'Connor said in a note.
The miner shipped 42.1 million tonnes of iron ore in the three months to December, up 2.4 per cent on the 41.1 million tonnes for the prior corresponding period, and marginally higher from the September quarter.
During the quarter, Fortescue sold its iron ore at an average realised price of $US40.46 per tonne, compared to $US50 per tonne in the September quarter.
It maintained its full year forecast of shipping 165 million tonnes of iron ore, and said demand for its products remained strong despite softening steel markets in China.
Fortescue shares were up six cents, or 4.11 per cent at $1.52.
Share
