Iron ore miner Fortescue Metals Group hopes to drive costs even lower this financial year as it looks to boost returns and cushion itself from an extended downturn in the commodities sector.
The company has lowered its guidance for cash production costs to $US12-$US13 per wet metric tonne (wmt) for 2016/17, down from its average cost of $US15.43 per tonne in 2015/16.
The Pilbara miner has raced to cut costs amid a collapse in prices in 2015, and has been using the extra cash flow to trim its heavy debt pile. Lower costs will also help Fortescue, the world's fourth largest iron ore exporter, to align its cost structure with larger rivals BHP Billiton, Rio Tinto and Brazil's Vale.
Iron ore prices plunged to a decade low of $US38 a tonne in late 2015, and have since recovered to be trading at around $US57.40 a tonne, still down more than 70 per cent over the past four years.
"We are continuing to look at productivity and efficiency improvements across the whole business," chief executive Nev Power told reporters after the company released its fourth quarter production review.
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"We are fast approaching our initial balance sheet targets and will continue to apply cash flows to further reduce debt."
The company's June quarter update was well received by the market, with Fortescue shares gaining 29 cents, or seven per cent, to $4.41. The stock has more than doubled in value in 2016.
Fortescue shipped 43.4 million tonnes of iron ore in the three months to June, including third party product. The quarterly volumes were up two per cent from a year earlier and three per cent higher than the March quarter's 42 million tonnes.
The company also cut costs for the 10th straight quarter, with cash costs averaging $US14.31 per wmt, down 35 per cent on a year earlier and three per cent lower than the previous quarter.
Fortescue is targeting shipments of 165-170 million tonnes in 2016/17, similar to the 169.4 million tonnes it sold in 2015/16.
"We have always been very responsive to the market, and we are keeping shipments at current levels," Mr Power said.
Fortescue said it held a cash balance of $US1.6 billion at the end of June and had repaid $US2.9 billion of debt during the 2015/16 financial year. Its gross debt is now estimated at $US6.6 billion.
The company borrowed heavily over the last decade to build its mines and related infrastructure, and has now nearly halved its debt from a peak of $US13 billion in 2013.
