Australia's third largest iron ore producer Fortescue Metals Group Ltd (Fortescue) has reported a net loss of US$18 million (AU$19.56 million) for the three months ended on September 30 of 2009 in its Special Purpose Financial Report for the 2009 September quarter after adjustments for foreign exchange and a note liability. The iron ore miner, which switched to reporting in US from Australian dollars this year, said the result compared to a restated profit of US$99 million (AU$107.59 million) for the previous September quarter.
As per the report, Fortescue's net result was partly due to a US$68 million increase in the value of its Leucadia Note liability and a US$25 million foreign exchange adjustment. Gross profit for the third quarter of 2009 was US$151.6 million, down from a restated US$249.4 million.
In the September quarter, the company posted revenue of US$596 million, up from US$532 million in the prior period. However, the cost of sales for the miner jumped 57 percent to US$444 million.
The West Australian iron ore producer said that it was obliged to review the note valuation at each reporting date. The increase in projected liability was due to an independent expert's forecast rise in future prices.
Meanwhile, Fortescue exceeded expectations for its shipped ore in the September quarter, and predicted the market for the valuable commodity would tighten. The miner shipped 9.53 million mt in the three months to September 30, up from 7.98 million mt in the previous quarter ended on June 30. On an annualized basis, production was 38 million per year, compared to the 35 million mt a year forecast. Fortescue said that it hoped to spend AU$360 million to ultimately expand production to more than 50 million mt per year by upgrading its Christmas Creek mine.
In August, Fortescue reported an annual net profit for the financial year ended June 30 of US$508.04 million, compared to a loss of US$771.77 million previously.
On the other hand, the company said last week that it was in talks to sell to Japanese and South Korean mills for the first time as it tries to take market share from Rio Tinto and BHP, broadening its sales beyond China.
"We've been in active discussions with them to begin negotiation with Japanese and South Korean steel mills next year," Fortescue's executive director Graeme Rowley said.
"As contracts come up for renewal, I would expect that they will come and talk very positively with us about us joining in their supply chain. They have already tested our ore and are very happy with the quality, so when they renew their contracts, we would expect to probably have some (contracts)," added Mr Rowley.
Mr. Rowley revealed that he expects the contracts to be for at least five million mt to South Korea and maybe five million mt to Japan.
Fortescue currently sells all of its production to more than 40 individual Chinese steel mills. It has long-term sales contracts for 90 million mt per year with China.