Fortescue Metals Group confident about China growth despite falling iron ore price, AGM told

UPDATE: FORTESCUE Metals concedes that the plunging iron ore price has been worse than it expected, but the miner insists it has several levers to pull if things get worse.

Fortescue Metals Group AGM. It's being held in the Grand Ballroom at the Hyatt in East Perth. pics CEO Nev Power .Picture THEO FAKOS

FORTESCUE Metals concedes that the plunging iron ore price has been worse than it expected, but the miner insists it has several levers to pull if things get worse.

Chief executive Nev Power said the Pilbara miner continued to deliver iron ore to China at an all-in cost of about $50 per tonne, while making good margins.

“We’re not at all concerned about this current iron ore price,” he told reporters after the company’s annual general meeting in Perth today.

“We’re making a strong cash margin at the current price.”

Fortescue Metals shares have fallen below $3 as iron ore prices have fallen under $US75 a tonne in an oversupplied market.

Fortescue achieved only $US71 a tonne during the September quarter, which was above its production costs but it will make it harder for it to repay debt.

Chairman and major shareholder Andrew Forrest took a swipe at Fortescue’s major competitors, saying he hoped BHP Billiton and Rio Tinto’s continued expansion in an oversupplied market would not affect relations between Australia and China.

“They’ve said they’re out to restrict the growth of other companies and restrict other opportunities being brought into the marketplace by their competitors,” he said.

“To me that’s a very fine line to tread when your major customer is one of those people you’re trying to shut out of the market.”

He said Rio and BHP seemed to be acting against the interests of their major customer and shareholders.

“I wouldn’t have thought it’s a very customer-friendly policy and I only hope that it doesn’t have any impact on the bilateral relationship with China, which is very strong.”

Fortescue Metals Group AGM — chairman Andrew Forrest. Picture: Theo Fakos

Commodities analysts have forecast further price falls for the steel-making commodity.

Mr Power said that the price would remain low for as long as it took for high-cost production to be removed from the market.

But he insisted Fortescue could run on very low capital.

“We can put all of our cash into paying down our debt and continuing to pay dividends to shareholders,” he said.

Any board decision to cut the company’s dividend would be taken in February, but over the long term Fortescue was committed to a dividend payout ratio of 30 to 40 per cent, he added.

Fortescue Metals shares closed six cents lower at $2.96.

Miners, big banks are leading stocks lower

THE Australian share market has closed sharply lower, pulled back by weakness among the big banks and the major miners.

IG market strategist Stan Shamu said the fact that all the major banks were now trading ex-dividend gave investors little reason to buy into them at the moment.

The lack of consumer confidence in the general economy, which could constrain credit growth and property prices, was adding to the lack of enthusiasm for the banks.

Mr Shamu said lower iron ore prices continued to hurt mining stocks, especially mid-tier “pure play” iron ore miners.

“Overall there’s just no positives — nothing to inspire investors,” he said.

Among the major banks, National Australia Bank was 29 cents lower at $32.65 as it moved towards settling a multi-million-dollar class action over unfair fees.

Commonwealth Bank shed $1.15 to $81.85 as chairman David Turner expressed cautious optimism about 2015, predicting slight rises in consumer spending and demand for credit from businesses.

ANZ backtracked 30 cents to $32.21, and Westpac surrendered 30 cents to $33.33.

In the resources sector, global miner BHP Billiton was off 97 cents at $33.20 as it scrapped the sale of its Western Australian Nickel West business after failing to attract a buyer.

Rio Tinto fell $1.10 to $59.41, and Fortescue Metals sagged six cents to $2.96.

Atlas Iron dumped 3.5 cents, or 14.29 per cent, to 21 cents, and BC Iron reversed nine cents, or 10.4 per cent, to 77.5 cents.

Among other stocks, department store Myer descended 14 cents, or 7.37 per cent, to $1.76 after posting a flat first quarter trade result.

Seven West Media also fell 3.5 cents to $1.755 as it warned a drop-off in government advertising would hit its first half profit.

Originally published as Fortescue Metals Group confident about China growth despite falling iron ore price, AGM told