Fortescue Metals still assessing impact of WA border backflip after record first half shipments
The iron ore heavyweight shipped record tonnes in the first half of the financial year, but says it is still assessing the impact of Western Australia’s decision to leave borders closed.
Fortescue Metals Group says it is still weighing the impact of the WA state government’s backflip on reopening the state’s hard border, after the company booked a strong finish to 2021.
The group released its December quarter production report on Tuesday, reporting that it shipped a record 93.1 million tonnes of iron ore in the first half of the financial year.
The iron ore major exported 47.5 million tonnes in the December quarter, with its half-year shipments up 3 per cent compared to the back half of 2020.
But the price the company received for its ore in the period dipped sharply in the quarter, with the company receiving an average of only 68 per cent of the benchmark price for iron ore – down from 73 per cent in the September period.
Fortescue was paid an average $US74.36 a dry metric tonne, against a benchmark that averaged $US109.61 a tonne, the company said. In the September period it was paid an average $US118.41 a tonne, against an average benchmark price of $US162.94.
Its operations had cash costs of $US15.31 a tonne in the December quarter, in line with the $US15.25 from the September period – but 20 per cent higher than in the last three months of 2020 reflecting the “price escalation of key input costs, including diesel, other consumables and labour rates, the integration of Eliwana as well as mine plan driven cost escalation”.
Fortescue shares closed down 5 per cent on the news, at $19.50, against a 2.5 per cent fall in the benchmark index.
Outgoing chief executive Elizabeth Gaines said Fortescue was still considering the impact of the decision of Premier Mark McGowan to backflip on a previous promise to reopen the WA borders on February 5.
“We continue to assess the implications of the uncertain timing of the reopening of Western Australia’s border to ensure we have access to the skills and expertise needed to maintain Fortescue’s significant contribution to our stakeholders, as well as the State and national economies,” she said.
WA’s tight labour market has lifted costs for the state’s mining industry, but holding onto tight border restrictions may push back an immediate threat to production levels in the sector from the rapid spread of Covid-19 through the workforce.
Other major miners, including BHP and Rio had warned the entry of the virus into the state could put production targets at risk in the short term due to worker absenteeism.
The vast majority of Fortescue’s haul truck fleet is now automated, meaning it has not suffered from the lack of drivers that have hurt output at its rivals.
But the company is still partly reliant on interstate workers for major construction projects such as its Iron Bridge magnetite project in the Pilbara.
Fortescue said on Tuesday that Iron Bridge was still on track for first production by the end of the year, with capital costs still within the revised range of $US3.3 to $US3.5bn. But the company warned that, despite making good progress at Iron Bridge, those estimates were still reliant on continued access to skilled workers.
“As the project ramps up to peak construction workforce numbers, the availability of labour and access to specialist skills remains a key focus,” Fortescue said.
The company finished December holding $US2.9bn, down from $US4.1bn at the end of September, after paying out $US915m in tax and spending $US744m on its growth projects.