By Harish Sridharan
(Reuters) -Fortescue Metals Group raised its full-year iron ore shipments forecast on Thursday helped by a production ramp-up at Eliwana operations, while increasing capital estimate for its key Iron Bridge Magnetite project in Western Australia.
The world's fourth-largest iron ore miner now expects to ship between 185 million tonnes (mt) and 188 mt of the commodity in fiscal 2022, up from a previous guidance of 180 mt to 185 mt. Shares of the company rose 3.5% to A$20.81 in early trading.
The Iron Bridge project, which is key to Fortescue's growth strategy, has faced several issues since its announcement, including the exit of its chief operating officer Greg Lilleyman and two other executives after a review last year.
Magnetite iron ore projects are notoriously difficult to develop. For example, China's CITIC Pacific Sino Iron project in Western Australia arrived years late and billions of dollars over budget.
After several cost revisions, Fortescue said the capital estimate for the Iron Bridge project has now been increased to $3.6 billion-$3.8 billion from $3.3 billion-$3.5 billion.
Coronavirus-related labour constraints also saw workforce levels significantly below the Iron Bridge project's plan for the quarter, Fortescue said.
The company, run by billionaire Andrew Forrest, shipped 46.5 mt of iron ore in the March quarter, compared with 42.3 mt a year earlier and beating an estimate of 46 mt from UBS. Costs were higher due to market inflation across key input costs and labour rates.
The Eliwana project in the Pilbara region of Australia has seen a ramp-up in production ever since first ore was processed in December 2020.
Fortescue raised its annual costs guidance to $15.75-$16.00 per wet metric tonne (wmt) from $15.00-$15.50/wmt, reflecting updated crude oil price assumptions and Australian dollar exchange rate.
Bigger rivals BHP Group (NYSE:BHP) and Rio Tinto (NYSE:RIO) have warned of risks to production from labour shortages and supply chain disruptions exacerbated by the pandemic, sustained high inflation, and a prolonged Russia-Ukraine war.