Fortescue Metals cuts capex plans; sells power station

Australia's Fortescue Metals Group, the world's fourth-largest iron ore producer, has slashed its capital expenditure plans for 2013 from $6.2 billion to $4.6 billion due to slumping demand for iron ore from European and Chinese buyers and continuing fall in prices for the commodity.

In a filing to the Australian Stock Exchange (ASX) yesterday, Fortescue said that it has taken the decisive action ''in response to volatile market conditions and uncertainty over future iron ore prices.''

Billionaire Andrew Forrest's company, which produced 55.8 million tonnes of iron ore for the fiscal year 2012 ended June, has brought down its near term production target by around 26 per cent to 115 million tonnes per annum (mtpa) from an earlier projected 155 mtpa by next June.

The miner will limit the expansion of its iron ore mines in the Pilbara region of Western Australia and related infrastructure. Fortescue said it will complete the expansion of its Christmas Creek mine, commission the low-cost Firetail deposit at Solomon mine and port and rail projects to meet the reduced target.

The development of the Kings deposit within the Solomon mining hub and the full completion of its fourth berth at Herb Elliott Port will be postponed until iron ore prices return to more sustainable levels, the company said.

It is expected that around 1000 jobs will be cut as part of the revised strategy. The capacity reduction and job cuts would reduce capital expenditure by around $1.6 billion and result in about $300 million in operational cost savings.