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Fortescue Metals cuts costs


Fortescue Metals Group will cut staff and defer some development work due to falling iron ore prices.

The iron ore miner on Tuesday said cuts to staff numbers and operating costs would immediately save $300 million.

Fortescue will also defer the development of the Kings deposit within its Solomon mining hub in Western Australia's Pilbara region, and the full completion of its fourth berth at Herb Elliott Port.

But it has confirmed its commitment to complete the expansion of its Christmas Creek mine.

The deferral of Solomon project developments will reduce Fortescue's production in the 2012/13 financial year to a range of 82 million tonnes and 84 million tonnes, down from its previous guidance of 86.5 million tonnes.

The company's capital expenditure forecast for 2012/13 has also been cut by $US1.6 billion ($A1.57 billion) to $US4.6 billion ($A4.51 billion).

"These measures reflect the company's ability to reduce and delay cash expenditures to meet market conditions and provide us with head room in the event of further deterioration of iron ore prices," chief executive Nev Power said in a statement.

"We are confident that the underlying fundamentals of the Chinese economy are strong and we believe iron ore prices will rebound in the medium term.

"However, we have moved quickly to strengthen the balance sheet."

Slowing demand from China has been the main cause of a drop in iron ore prices, with spot prices down by 50 per cent from the record levels of about $US180 ($A174.70) a tonne in the first half of calendar 2011.

The company intends to complete the development of its Solomon project when market conditions recover, Mr Power said.

Fortescue shares were up eight cents, or 2.3 per cent, at $3.64 at 1030 AEST.