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Ore grade gamble pays off for Fortescue Metals Group

Fortescue, famous as the Pilbara’s low-grade iron ore producer that slashed costs to survive when prices plunged, now sees itself as the innovative, nimble player responsive to a changing market.

Fortescue chief executive Elizabeth Gaines said in the past the focus had been how many tonnes Fortescue was going to produce and at what cost.

Ms Gaines said a new high-grade 60.1 per cent iron product, West Pilbara Fines, to be shipped later this month, could attract a premium of $10 a tonne with a negligible effect on costs.

“It’s straight through to the bottom line,” she said.

Fortescue is picking the eyes out of two of its mines to collect high iron ore content for the new product.

Low phosphorous Cloudbreak ore and higher phosphorous ore from Firetail are stockpiled at the mine and every third week railed to Port Hedland and layered in alternating slopes on the stacks.

As a reclaimer slices horizontally through the stack to collect ore for loading, the product from the two mines is mixed to keep the level of phosphorous within specification.

The self-styled third force in iron ore plans to ship five to 10 million tonnes of the new product this financial year. Fortescue plans to load the first ore from its $US1.275 billion Eliwana mine in December 2020 to grow production of West Pilbara Fines to an eventual 40 million tonnes a year.

The prospect of higher margins does not seem to have changed Fortescue’s approach to its costs.

Chief operating officer Greg Lilleyman said Fortescue had bought Chevron’s 2000-bed accommodation camp from the Wheatstone LNG project.

“We picked it up for a song,” he said of the purchase that will be split between the Eliwana mine construction site and two rail camps.

“Some very frugal thinking from the project team. The guys are starting to call themselves Steptoe and Sons because they went and bought a second-hand power station from Roy Hill as well.”

Sales and marketing director Danny Goeman said he was less concerned about China’s efforts to improve air quality this northern winter.

After previous drastic shutdowns of steel mills to reduce pollution, remaining mills have switched to higher-grade ore to meet demand, increasing the discount for lower- grade ore that is the bulk of Fortescue’s current production.

He said the authorities were maintaining their focus on air quality but taking a more targeted approach.

Mr Lilleyman said by mid- November last year, firm and absolute restrictions were in place.

“This year that hasn’t occurred, there hasn’t been a blanket X per cent cut,” he said.

The reporter travelled to the Pilbara courtesy of Fortescue Metals Group.

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