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That is a 7% reduction on the C1 cash cost in the September quarter and 21% down on the prior corresponding quarter.
During the quarter the Pilbara iron ore miner also repaid another $1 billion in debt, reduced its gross gearing to 36% and net gearing to 30% and improved its safety statistics. Its total recorded injury frequency rate for the December 2016 quarter was 3.2, a 6% improvement on the previous quarter.
FMG has been enjoying the higher than expected iron ore prices, which has helped drive its debt reduction activities that had the company blow past its previous gearing target of 40%.
Not that it has all been plain sailing.
A big portion of the company’s C1 cash cost improvements over the past few years have been the low fuel price and the strength of the US dollar against the Australian dollar.
While the US dollar has stayed in the 75c range FMG had given guidance on, the oil price went up by about $US5 per barrel during the period.
FMG group manager finance & investor relations Stuart Gale said the company had been able to absorb the impact of higher fuel costs with other efficiencies it made over the quarter.
He said those included mining efficiencies, more efficient use of trucks, improvement maintenance strategies and improved mining hygiene.
The miner is sticking with its full year guidance of C1 costs of $12-$13/wmt.
FMG CEO Nev Power said the company’s total cash costs, which included things such as shipping rates are about $US30 per dry metric tonne.
Power said shipping rates had increased over the period to about $6/t Pilbara to China.
He said the company was on track to meet its full year guidance of producing 165 million tonnes to 170Mt of iron ore.
It appears there is a bit of a structural shift coming in the Chinese steel market too.
FMG director of sales and marketing David Liu said the Chinese government was moving to eradicate illegal electric furnaces, which would remove about 40 to 60 million tonnes of steel from the market.
That shortfall, Liu said, would be picked up by integrated steel mills in China, meaning they would require more iron ore.
He said that would probably mean about 40 to 50 million tonnes of extra iron ore demanded.
However, given China imported 1.02 billion tonnes of iron ore in 2016 that is a relative drop in the bucket.
