Australia's third largest iron ore producer, Fortescue Metals Group, has reported a strong rise in net profit as it powers towards its goal of tripling annual production but the company is wary about commiting to any expansions beyond that point.
FMG increased full year net profit by 53 per cent to a record $US1.56 billion ($A1.49 billion).
The result occured despite lower iron ore prices, with Fortescue benefiting from record shipments of 55.8 million tonnes.
The higher shipments drove a 23 per cent jump in operating sales revenue to $US6.7 billion for the year.
The latter was offset by a 46 per cent hike in the cost of sales to $US4 billion.
That was driven by an increase in the total material moved, the ramp-up to full rates of production at the Christmas Creek mine and a higher Australian dollar, the company said.
FMG spent $US6.1 billion on capital expenditure and its guidance indicates it expects to spend another $US6.2 billion in the current year.
More than two-thirds of cap-ex figure went on ambitious plans to nearly triple production to 155 million tonnes a year.
Managing director Nev Power said the company was “in the process of working up a range of expansion options”.
His goal was to have these options “push button ready”, the timing and detail of future expansions “will be determined largely by market conditions at the time”.
Mr Power added that the company would only pursue further growth projects after it had consolidated its balance sheet and reduced debt to “sustainable” levels; that meant a gearing ratio of 30 to 40 per cent.
He hinted that the company would prefer to seek increased exports through the existing inner harbor at Port Hedland, saying only half of its nominal 495 million tone capacity was being used.
“I don’t think Port Hedland capacity is a major constraint for anybody,” he said.
BHP Billiton is pursuing a similar goal, after managing director Marius Kloppers announced yesterday that its proposed outer harbor project at Port Hedland was being postponed at least a year.
Mr Power said the development of a new port at Anketell Point was still an option under evaluation.
However his comments on Port Hedland, and his observation that future expansions will have a lower capital intensity, suggest Anketell Point is less favoured than it had been in the past.
The Pilbara miner declared a final fully-franked dividend of four cents per share, saying this reflected its disciplined approach to financial management.
