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PrintFortescue Metals Group, the world's fourth largest iron ore producer, posted a sharp rise in shipments in the September quarter as a $9 billion mine expansion programme nears completion and ore prices strengthened.
Fortescue, which opened its first mine just five years ago to feed demand in China, also said in its third-quarter production report it had used its strong cash flow to start paying off debt amassed to build the project,
"We are past peak debt," Fortescue Managing Director Nev Power told a media briefing on Thursday.
Fortescue has been a big winner from the recent unexpected strength in iron ore prices, with its share price almost doubling from a June low.
"A confluence of things have worked in their favour and they've delivered (on their projects) and been able to perform well," said Ric Ronge, a portfolio manager at Pengana Capital.
Despite persistent forecasts for a price fall due to greater supply and slower Chinese demand growth, benchmark 62-percent iron ore sold for at least $130 a tonne for much of the September quarter.
Fortescue, which currently has net debt of $9.3 billion, had paid down $128 million in redeemable preference shares and expected to pay down a further "$1 billion-plus" in the next few months, Power said.
Fortescue said total September quarter shipments of iron ore rose 61 percent to 25.9 million tonnes versus the year-ago period and 4 percent over the previous quarter.
It sold its iron ore for an average $121 per dry metric tonne, up from $113 in the June quarter.
Fortescue typically sells ore at a 12 percent discount to the benchmark due to its lower iron content.
Analysts had been forecasting a big drop in prices in the September quarter based on predictions China's steel producers would reduce purchases in order to draw down inventories.
UBS still sees iron ore falling as low as $70 a tonne before the end of the year but even so believes the drop will be short-lived, with a recovery in place before the start of 2014.
Power said iron ore inventories held in China were already at historically low levels, with little room for more de-stocking, suggesting prices will hold up.
"This is not to say there can't be some short-term volatility, but we certainly don't see any conditions that would support low iron ore prices and certainly not to the levels some are forecasting," he said.
The strong iron ore price and Fortescue's improved balance sheet also meant the company was no longer under pressure to sell a minority stake in its TPI rail and infrastructure unit, Power said, which analysts estimated could fetch up to A$4 billion.
"Those talks are pretty much at an end," he said.
Shares in Fortescue, which rose sharply in recent days to touch a 17-month high, were down 2.8 percent in late afternoon trade on Thursday.
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