Logistics key to Fortescue's $1.6 billion profit

Logistics infrastructure drives a 53 percent profit rise for Fortescue Metals Group

Logistics key to Fortescue's $1.6 billion profit
Logistics key to Fortescue's $1.6 billion profit

By Sean Muir |
October 11, 2012

Expanded logistics infrastructure has helped Fortescue Metals Group drive a 53 percent profit rise.

Fortescue’s 2012 financial report, released yesterday, shows a net company profit after tax increase of US $1.6 billion (AU $1.56 billion), a rise of 53 percent on the previous year.

Fortescue CEO Nev Power says
expanded infrastructure allowed
the company to ramp up operational activity, exceeding its 55 million tonne target for the full year with a total 57.5 megatonnes (mt) shipped, including 55.8mt of Fortescue product, a 40 percent production increase on the previous period.

"The year was epitomised by the ramp up in operational activity as infrastructure was completed by the expansion team and handed over to operations, culminating in an excellent fourth quarter when both port and rail operated at a rate of approximately 70 million tonnes per annum (mtpa) in the month of June," Power says

Power says the company’s strong profit was achieved off the back of a 23 percent increase in revenue to US$6.7 billion (AU $6.55 billion) and a 14 percent rise in earnings before interest, taxes, depreciation, and amortization (EBITDA), to US$3 billion (AU $2.93 billion).

Power says
this was driven by increased production from the company’s expanded Chichester operations – a mining hub in Western Australia’s Pilbara Region made up of Fortescue’s flagship mine site Cloudbreak and its Christmas Creek mine site – with the additional volumes more than compensating for reduced product prices.

According to Power, production from the Chichester operations exceeded nameplate capacity after a reclaimer – a machine used in bulk material handling applications – was commissioned at Christmas Creek in the first quarter.

He says expansion work also continued in the Cloudbreak wet front end, and that Christmas Creek’s second ore processing facility (OPF) is progressing on target for Chichester to achieve 95mtpa by December 2012.

The company
also opened a third berth at Herb Elliott Port
in May, and a second train unloader was commissioned during September this year, taking port capacity to about 115mtpa.

"In conjunction with the duplication work of the rail system and the additional train sets now being commissioned, this completes the infrastructure work required to allow our expansion from the Chichester and the commencement and ramp up of the Solomon Firetail mine to take our production capacity to 115mtpa by the end of the March quarter 2013," he says.

"Approval for the fifth berth at Port Hedland was granted in August this year which will ultimately allow us to maximise use of under-utilised Port capacity by further developing our highly efficient lay-by berth configuration to enable more efficient use of inner harbour capacity."

Power says expanded port facilities are at the heart of the company’s ability to achieve expansion plans for the future.

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